Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

MESSAGE FROM THE QUEEN

QUEEN'S SPEECH (ANSWER TO ADDRESS)

The VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address, as follows:

I have received with great satisfaction the loyal and dutiful expression of your thanks for the Speech with which I opened the present Session of Parliament.

Oral Answers to Questions — ENVIRONMENT

Rate Support Grant

Mr. George Gardiner: asked the Secretary of State for the Environment if he will make a statement on the rate support grant for the coming financial year.

Mr. Gow: asked the Secretary of State for the Environment whether he will make a statement about next year's rate support grant.

The Secretary of State for the Environment (Mr. Peter Shore): I have already done so.

Mr. Gardiner: Will the Secretary of State accept that the likely increases in rates in many areas will be well beyond the ability to pay of many people who will be unable to increase their income to cover them? Does he also accept that further substantial increases will bankrupt many small firms? Will he acknowledge that, particularly in local authority areas bearing the heaviest burdens, the consequence of a cut-back in services must be a cut-back in those administering them?

Mr. Shore: I hope that the rate support grant settlement that I have announced will not have those dire consequences. If hon. Members look at rate increases for the years since 1973, they will find that this is by no means the most horrifying figure that can be recalled. The effect on particular authorities is always difficult to judge because we make a national settlement. I accept that there will be difficulties in some areas and that some services will have to be cut.

Mr. Gow: Although I congratulate the Secretary of State on his courageous reduction in the rate support grant, will he tell the House frankly that this reduction will mean substantial cuts in local authority expenditure? Does he accept that the average rate increase of 15 per cent., of which he spoke, will spell bankruptcy to businesses and real and grievous hardship to many ratepayers?

Mr. Shore: I do not believe that my settlement justifies words of the kind used by the hon. Gentleman. On the other hand, I acknowledge that this is a severe settlement—that is the word I used—but it is also a carefully calculated settlement. I do not want anyone to have any illusions about what we are anticipating. We anticipate that in 1977–78 there will be a reduction in real terms of about 1·6 per cent. in overall expenditure compared with the outturn for 1976–77. That figure will be consistent with what we originally planned in the White Paper at the beginning of the year.
As I have said on every possible occasion, at the consultative council and elsewhere, the reduction in expenditure which we anticipate is consistent with the wastage figures nationally and well within the range of annual wastage which all local authorities experience. Except in certain circumstances, they will be able to absorb the reductions.

Mr. George Rodgers: Does my right hon. Friend agree that present circumstances warrant the encouragement of municipal enterprises? Does he agree that in many local authorities, and certainly in many Conservative-controlled areas, considerable reward is gained from such activities as the hiring out of deck-chairs and squash courts? Is not this a golden opportunity to extend municipal enterprises?

Mr. Shore: From their experience of local authorities, hon. Members on both sides of the House will agree that local authorities can and do operate services and enterprises over a wide area. The only thing I want to add is that it is essential in the present circumstances that such enterprises should be successful and that their cost should not simply fall on the rates.

Mr. Speed: What figure is the Secretary of State using for the average annual wastage rate that he believes will cover the redundancies?

Mr. Shore: The figure for the average annual wastage is about 5 per cent. The figure in my mind is about 1 to 1½ per cent. It is nearer to 1 per cent. than to 1½ per cent.

Direct Labour Departments

Mr. Wyn Roberts: asked the Secretary of State for the Environment why he is proposing to introduce a new Bill to expand local authority direct labour departments.

The Minister for Housing and Construction (Mr. Reginald Freeson): The Bill we shall introduce will remove obstacles to and introduce improved controls for operating efficient direct labour organisations and thus make the benefits of their activities more widely available.

Mr. Roberts: Do not these Government proposals mean an inevitable increase in local staff—an increase which has been condemned by many members of the Labour Party—and an increased burden on the ratepayer at a time of increasing severity, as mentioned just now by the Secretary of State?

Mr. Freeson: As the object of the Bill and the Government's policy is to increase the effectiveness of efficient direct labour organisations and to detract from the practices of inefficient DLOs, the opposite effects to those described by the hon. Gentleman will be produced.

Mr. Stan Crowther: Is the Secretary of State considering the introduction of further legislation to remove other restrictions on local authorities so that they may enter into more profitable activities? Does my right hon. Friend agree that there is something illogical in the view that only private enterprise may make a
profit, and would it not be a good thing for ratepayers to be allowed to go into profitable commercial activities in general?

Mr. Freeson: I accept the principle contained in my hon. Friend's latter remarks. If in the general body of his supplementary question he is referring to the abolition of the ultra vires principle, as I imagine he is, that is certainly not under consideration at present. We shall simply proceed with the Bill to deal with DLOs.

Mr. Heseltine: Does not the Minister understand that since the Layfield Report the practices of direct labour organisations have been widely condemned? Would it not be better to set out a code of practice under which DLOs had to prove that they were effective and efficient before being given any extension of powers?

Mr. Freeson: The reference to the Layfield Report is not particularly apposite. Several reports over the years have been critical of inefficient aspects of certain DLOs. It is equally true that many DLOs are very efficient, and that many private firms are efficient and others are inefficient. I ask the hon. Gentleman to await the Bill, because we shall undertake to do just what he has put to me.

Rent Loss Certificates

Mr. Hodgson: asked the Secretary of State for the Environment if he will make a statement on the progress made by the district auditors in assessing the size of rent loss certificates under the Housing Finance (Special Provisions) Act 1975.

The Under-Secretary of State for the Environment (Mr. Ernest Armstrong): Twelve rent loss certificates have been issued in England for amounts totalling £594,187. I understand that no more certificates are expected.

Mr. Hodgson: Does the Minister accept that local people have the right to know who in their area is breaking the law? Will he authorise the publication of the names of those involved in the issue of rent loss certificates?

Mr. Armstrong: No, Sir. We have given the names of councils, and it is not our intention to give the names of the individuals. If the hon. Gentleman will


read the debate on this subject, I am sure he will agree that we need to go no further than we have gone.

Mr. Skinner: Does my hon. Friend appreciate that 11 councillors at Clay Cross were repeatedly named for incurring losses arising out of the non-implementation of the Housing Finance Act, much more so than many other councillors involved in the non-implementation of the Act throughout the country? Why do those people in Clay Cross, who have been bankrupted and are being leaned on by the Official Receiver and thrown out of civic life, continue to be treated in that way by the Government when the names of the other 400 will not even be published?

Mr. Armstrong: My hon. Friend will recall that it was three years ago that the names were given. That was before legislation. Since legislation, we have decided not to publish individual names.

Housing Finance Review

Mr. Geoffrey Finsberg: asked the Secretary of State for the Environment when he expects to publish the housing finance review.

Mr. Shore: I expect the policy review to be completed within the next few weeks. I intend that the Green Paper will be published as soon as possible next year.

Mr. Finsberg: Does the right hon. Gentleman appreciate that the House has waited a long time for this document? Will he assure us that when its results ale translated into a Green Paper there will at least be adequate opportunity for consultation before he or his colleagues suddenly rush a Bill through the House?

Mr. Shore: I certainly give that assurance to the hon. Gentleman. I believe that very complex and important questions are involved on which there must be adequate consultations.

Mr. Frank Allaun: Will the Secretary of State postpone, at least beyond next week and until the review is published, any proposals or decisions to cut council house subsidies? Would not such a cut mean a further worsening in the standard of living of millions of families and pre-empt the recommendations of the

review, which covers all housing and not only council houses?

Mr. Shore: My hon. Friend will realise that it is a little difficult for me to anticipate any matters that may be before the House during the coming week. All I can say is that these and many other considerations have been very much in my mind.

Mr. Sainsbury: Will the Secretary of State expedite the review of the operation of the Rent Acts so that it may be taken into consideration when the Green Paper is being drawn up, especially as it is widely accepted that the Rent Act 1974 has resulted in a reduction in the supply of accommodation available for letting?

Mr. Shore: Without accepting what the hon. Gentleman said about the effect of the Rent Act 1974, I certainly assure him that we are reviewing the Rent Acts. It is proper for us to do so, and we shall issue a consultation document very shortly. The broader issues of the private sector in housing will also be covered in general terms in the review.

Mr. Douglas-Mann: I well appreciate my right hon. Friend's difficulty in replying to the supplementary question asked by my hon. Friend the Member for Salford, East (Mr. Allaun), but does he not agree that it would be tragic to preempt the effect of the review by decisions taken in advance? Will he impress on his colleagues that for most of us it is investment in new house building and improvements which is the vital matter and that, if there have to be cuts, they should be not on investment but on rents and mortgage subsidies?

Mr. Shore: I note what my hon. Friend says about his preference in terms of making an adjustment to the total housing budget, but I feel I should not comment further on matters which, I assume, will be dealt with during the coming week.

Mr. Heseltine: Will the right hon. Gentleman bear in mind that the most easily obtainable source of additional finance to help the already over-pressed local authorities would be from imaginative schemes to enable council house tenants to buy their own homes?

Mr. Shore: I understand the theoretical attractiveness of that suggestion to Conservative Members, but we should not


mislead ourselves about the present possibilities of pursuing that policy. Since the change of control in some councils, efforts have been made to push forward imaginative proposals to sell council houses, but we all know that in the present financial circumstances it is difficult to proceed with those proposals.

House-Builders' Federation

Mr. Hal Miller: asked the Secretary of State for the Environment when he next intends to meet representatives of the House-Builders' Federation.

Mr. Armstrong: Frequent contact is maintained with the House-Builders' Federation. My Department will now meet the HBF regularly in a working group set up last month.

Mr. Miller: What representations has the Minister received from the federation about the effects of Government policy on employment in the construction industry, the price of houses and the rate of house building?

Mr. Armstrong: The representations have been widely publicised. We are concerned about the level of employment and the difficult situation in the construction industry. We have had very profitable discussions with the federation.

Mr. Alan Lee Williams: Will my hon. Friend ask the federation to review its procedure for investigating complaints about the structure of houses? I believe this to be in need of revision. If I send to my hon. Friend particulars of a case, will he look into the matter for me?

Mr. Armstrong: Yes. This is one of the difficulties. If my hon. Friend cares to submit a case, I shall consider it carefully and take it up with him.

Mr. Budgen: Will the hon. Gentleman confirm that house builders expect the number of starts of private houses next year to fall by about 30 per cent.? Is that not an inevitable consequence of the enormous size of the public sector borrowing requirement and the consequent high interest rates?

Mr. Armstrong: The public sector borrowing requirement is obviously one of the causes. That is why the Government are insisting on their economic strategy. The only way to get the construction industry

in the situation that we want for it is by getting the economy right.

Mr. Loyden: When my hon. Friend next meets the federation, will he bring to its attention the low quality of building of many council houses and the millions of pounds that local authorities have had to spend on remedial work as a result of the very bad work that has been carried out by private enterprise when building council houses?

Mr. Armstrong: That is an aspect that is giving us great concern. It is one of the matters that we discuss with the builders when we see them.

Mr. Rossi: Will the Minister confirm the forecast of the President of the House-Builders' Federation that housing output in both the private and the public sectors will fall by one-third next year? Has he noted the report today that the Building Societies Association estimates that about £1,500 million less will be available for mortgages next year than this year? Will he consider the effect that that will have on house building and new starts?

Mr. Armstrong: We get numerous forecasts, and I am not going to enter the forecasting game. I remind the House that starts and completions during 1975 were almost 50 per cent. up on 1974. That rate is being maintained this year. As I say, I am not going into forecasts for next year.

Coal Project (Vale of Belvoir)

Mr. Farr: asked the Secretary of State for the Environment if he will call in the planning application to mine coal in the Vale of Belvoir.

The Under-Secretary of State for the Environment (Mr. Kenneth Marks): No such planning application has yet been made. If one is made, we will consider the appropriate action.

Mr. Farr: Is the hon. Gentleman aware that coal is just as much a national asset inside the ground as out of it? Before deciding to extract coal from the Vale of Belvoir, will he take into account the availability, cost and efficiency of alternative forms of energy?

Mr. Marks: I am sure that the whole question of the energy gap, which Ministers in the Department of Energy have


answered, concerns not only the Department of Energy but all of us. My right hon. Friend and I will consider all the environmental aspects when this matter is being considered.

Mr. Ronald Atkins: Is my hon. Friend aware that the land that would be lost in this undertaking would be minimal compared with the 50,000 acres that are lost every year to industrial undertakings and roads without any complaint from Conservative Members? Does he realise that the saving of derelict land in town centres and old industrial areas would more than make up for any loss in the Vale of Belvoir?

Mr. Marks: I am grateful to my hon. Friend for making that point. My Department cannot consider this matter until the local authority has considered it. I feel that the local authority and the local people should have an opportunity to examine the application before anything comes to my Department.

Rates

Mr. Cronin: asked the Secretary of State for the Environment what advice he proposes to give to local authorities on how to minimise increases in rates, having regard to the Government's proposed limitation of rate support grants.

Mr. Shore: The order giving effect to the rate support grant settlement requires the approval of this House. If this is obtained, I would then propose to issue a circular to all local authorities explaining the implications of the settlement.

Mr. Cronin: Does my right hon. Friend agree that increasing rates are now becoming an intolerable burden for many people who are least able to afford them? Will he give detailed and frequent advice to local authorities on how to reduce expenditure, consistent with Socialist priorities?

Mr. Shore: It is not my intention to give detailed advice. I believe that the local authorities themselves must be the deciders of the pattern of expenditure for which they are responsible. We shall be indicating some of the priorities as we see them. I emphasise that it is for the local authorities to make these decisions. As for the intolerable burden of rates, I do not wish in any sense to minimise the effects of increasing rates, but I am

almost as surprised as, I suspect, other Members will be to find by how little rates vary as a percentage of disposable income not only from one year to the next but over decades. We have to bear that in mind.

Mr. Michael Morris: What value can the local authorities place on the Secretary of State's recommendations when he suggests that unemployment will be only 25,000 and the authorities have calculated that it will be at least 50,000?

Mr. Shore: Some of the local authorities made calculations. I pointed out to them—I think that I had by far the better of the argument—where they were wrong. They made wrong estimates about the level of expenditure that we were seeking to achieve in 1977–78. They also made other miscalculations. I do not complain about that because they did not have all the information that was available to us. However, I rebut their figure.

Mr. Noble: Does my right hon. Friend accept that while he may advise local authorities he has little power to instruct them, especially in the direction in which they will put their expenditure? What steps will he take to ensure that we do not have a repetition of the action that was taken in Bury last year, when the Tory-controlled authority vindictively and indiscriminately attacked social services and closed a number of establishments?

Mr. Shore: This is a great problem, but I put it to my hon. Friend that it is one of the hazards that arises out of local democracy. Although I share my hon. Friend's feelings about under-spenders, equally there is great sentiment about what people assume to be over- spenders. Unless we leave discretion to local authorities, I honestly do not see how we can conduct local democracy.

House Building

Mr. Ovenden: asked the Secretary of State for the Environment what are the latest figures for housing completions in the public and private sectors ; and if he will make a statement.

Mr. Skinner: asked the Secretary of State for the Environment what are the latest figures for house building, both public and private.

Mr. Shore: The house building figures for October show 153,700 starts and 135,800 completions in the public sector in Great Britain for the first 10 months of this year, and 136,900 starts and 124,800 completions in the private sector. In spite of disappointing figures for the month of October, the figures for the first 10 months of this year show increases over the levels of house building achieved in the same 10 months of 1975.

Mr. Ovenden: As public sector housing starts and completions are bound to decline still further as a result of public expenditure restraint, what action does my right hon. Friend intend to take to ensure that the stock of public sector housing is preserved and made available to those in housing need? What action will he take against local authorities such as mine which insist on going hell-bent on the indiscriminate sale of council houses and which allocate houses on the fifty-fifty principle with public money on criteria other than those of housing needs?

Mr. Shore: I shall be willing to hear from my hon. Friend any details that he cares to give me about the housing policies of his own housing authority. As he knows, there is not an open door to the sale of council houses. The information that I have so far this year shows that the sale of council houses is probably at its lowest level since we started keeping the figures. We should not necessarily assume that what may be the intentions of certain councils are being turned into actual practice. As for the decline of the house-building programme, we have given the figures and our view of what will be the figures of starts and completions for the next year. I do not think I have any reason to add to or detract from that.

Mr. Skinner: Will my right hon. Friend admit that in the past quarter completions are down roughly 10 per cent. across the private and public sectors? Does he accept that it is no longer good enough for him to blame the Tory Government, the weather or the thousand and one other things that Ministers constantly trot out? Does he accept that he and his Department are responsible for throwing building workers on the dole and having millions of bricks stocked? These are the consequences of cutting back public expenditure on housing. My right hon.

Friend's job is to ensure that no more is conceded to the IMF in the current negotiations.

Mr. Shore: I have to advise my hon. Friend again to wait and see what comes out of the statement that is to be made. I am very conscious of the need to maintain the house-building programmes, in particular in the public sector. I remind him that last year, 1975, we built 50 per cent. more houses than in 1973. The information which I have indicates that we shall not do worse than that this year either—that is to say, in 1976 we shall build about 50 per cent. more houses than were completed in 1973. I am not expecting any collapse of the public building programme in 1977 either.

Mr. McCrindle: With regard to the private sector, has the Secretary of State seen the suggestion that anything short of a 14 per cent. mortgage lending rate is unlikely to attract sufficient funds to the building societies to enable them to sustain the reduced programme to which he has referred? Will he comment on where, in these circumstances, he feels that funds are likely to come from to complete this unsatisfactory number next year?

Mr. Shore: I am sure that the building societies will continue—as they have tended to do for some time—to give priority to new building in their allocation of new funds. I am aware that in the last month particularly there has been a drastic falling-off in funds for building societies. I believe that that particularly reflects the very high level of interest rates. But, looking to the period ahead, we have obviously, as have the building societies, to take a view about the likely trend of interest rates and the likely trend of comparable rates. The building societies have built up a certain cushion of reserves, and they have been able so far to manage to maintain a high level of lending, although obviously they will have to keep this under permanent review.

Mr. Fernyhough: With regard to the selling of council houses, to which reference was made earlier, can my right hon. Friend say whether they are still being sold as public property at 25 per cent. of their value? If that is so, ought he not


to take steps to induce the private property holders to sell their property to their tenants at 25 per cent. less than its value?

Mr. Shore: As I recall the circular that was sent out a little over 18 months ago—and I have no reason to believe that things have changed—certain sales were permitted to sitting tenants at 20 per cent. below the market value—not of the market value, but below the market value. To the best of my knowledge, that remains the situation. If my right hon. Friend needs any more information, he can get in touch with me.

Mr. Heseltine: Will the Secretary of State recognise that his quotation of and reliance on historic figures for completions is wholly misleading in relation to the crisis facing his house-building programme? The October figures show that starts in the public sector were down 14 per cent. on a year ago and that they were 6 per cent. down in the private sector. Will the right hon. Gentleman recognise that his programme is now in ruins and that the only prospect of restoring faith to the house-building industry is by getting interest rates down, so that in the public and private sectors people can afford to buy and to build houses?

Mr. Shore: It is all very well for the hon. Gentleman to unleash an attack in that way, but it is no good any of us, if we are serious, bandying figures about on the basis of one or three months. I have given the figures, showing that, based on all the information we have, our completions will be higher in 1976 than in 1975. That is the first point. We shall maintain a strong public sector programme in 1977, and the figures have already been given.
With regard to interest rates, here again one would imagine from the question that interest rates had never gone up before. When the hon. Gentleman's party came to office in 1970, interest rates, as I recall, were at 6 per cent. When the Conservative Government left office, interest rates were at 11 per cent. [Interruption.] Of course they have gone up since. If, however, the hon. Gentleman is putting forward the idea that the only factors operating on interest rates are those that affect Labour Governments, he had better think again.

Rate Relief (Disabled Persons)

Mr. David Hunt: asked the Secretary of State for the Environment what action he will take in connection with the need to provide rating relief for disabled people.

Mr. Freeson: Rate relief is already available for facilities for disabled people under Section 45 of the General Rate Act 1967, as extended by Section 20 of the Local Government Act 1974. I am considering whether action is required to clarify or amend this legislation in the light of the judgment of the House of Lords in the case of Vandyk v. Oliver.

Mr. Hunt: The Minister's reply is not good enough. It is now a long time since the House of Lords' decision in Vandyk v. Oliver. It is seven weeks—[HON. MEMBERS : "Ask a question."] It is seven weeks—[Interruption.]

Mr. Speaker: Order. If the hon. Gentleman will put his question in an interrogatory form, it will help us all.

Mr. Hunt: I was taken aback by the dreadful answer, Mr. Speaker. Is the Minister aware that it is now some time since the decision in Vandyk v. Oliver, and that it is seven weeks since he said that he was urgently considering legislation? The severely disabled need sympathetic treatment. When will they get it from the Government?

Mr. Freeson: May I suggest to the hon. Gentleman that he should avoid rhetoric in this matter? This is a highly legalistic and complex matter—[HON. MEMBERS: "Oh."] I doubt very much whether the people who are doing the oh-ing and ah-ing have read the case. They should do so. I have read the papers and I know that it is a highly complex matter. I shall make the statement as soon as I can, although there are difficulties involved and problems of equity. I shall treat the matter as sympathetically as I possibly can. I remind the House that I was a very active sponsor of the Chronically Sick and Disabled Persons Act 1970, and I am very concerned in this subject.

Mr. Hal Miller: In view of the Minister's well-known interest in this matter, will he give the House an assurance that he will look sympathetically into


the question of rating and rent subsidies for hostels run by societies for helping the disabled, and particularly the mentally handicapped? Is he aware that at present such hostels are unable to attract a housing subsidy or rate relief, although their individual occupants would be able to do so?

Mr. Freeson: I do not know to which hostels the hon. Gentleman refers. It may be that there are some historic cases which he has in mind. But we have already acted on the matter of subsidy by the Housing Act 1974, one of the first measures we introduced. Under it we virtually absorbed hostel provision of all kinds, by housing associations and by local authorities, into the subsidy generally for housing. Perhaps the hon. Gentleman will give me details of the cases he has in mind.
With regard to the rating aspect, there are both mandatory and discretionary powers already operating. It is possible for a charitable organisation to get 50 per cent. derating on a mandatory basis, and there are discretionary powers for local authorities to consider rerating, if they feel it is right to do so, on application.

Rate Support Grant

Mr. Beith: asked the Secretary of State for the Environment whether he is satisfied that under his recently announced rate support grant settlement the burden of cuts is fairly distributed between urban and rural authority and between those who have responded to his earlier calls for economies and those who have not.

Mr. Shore: I look forward to the opportunity that will be presented by our forthcoming debate on the Rate Support Grant Order to explain more fully the basis of my proposals for the distribution of grant. I consider that a fair and just balance has been struck to meet the varying needs of authorities.

Mr. Beith: Does the Secretary of State recognise that in rural counties such as Northumberland it is not possible for people to enjoy the same level of services as in some urban areas, and that it has been found hard to cut them in attempting to comply with his earlier request for economies? Is his Department trying to find a way of making sure that in future

it will penalise councils which have been spendthrift, and be more reasonable in its treatment of authorities which have tried to comply with the guidelines?

Mr. Shore: I hope the hon. Gentleman will agree that what we have tried to do in this settlement, as in others, is to assess the situation for needs grant purposes as accurately as we can. Inevitably it is a broad-brush process, but that is what we have tried to do. Needs are greater in many of the large urban areas than elsewhere, although I do not discount the fact that there are also needs to be met in all parts of our land.
On the subject of penalising or dealing with over-spenders, I tried earlier to make clear that we do not have the detailed information to enable us, without virtually taking over local government, to say what is an over-spender any more than to say what is an under-spender. Unless I were convinced that I could operate such a system fairly, I would be afraid of committing more errors and injustices than, in a sense, I admit the present broad-brush system does.

Mr. Kilroy-Silk: Is my right hon. Friend aware that the metropolitan borough of Moseley, in my constituency, has a high level of rates through no fault of its own and that it also faces serious social and economic problems? Does he not agree that what is needed is more resources from the central Government rather than less?

Mr. Shore: My hon. Friend will recognise that in the settlement we have reached we have tried to take account in the needs element of the greater social needs which I genuinely believe are to be found in the major urban centres. Although it is not for me to say what is the experience of each individual authority, I am sure that my hon. Friend will want to wait and see the effects on Moseley.

Mr. Tebbit: Will the right hon. Gentleman accept from me, as a London Member, that he has behaved very unfairly towards rural areas such as East Anglia, which are notoriously low-wage areas, and that in many cases there is a good deal of rural poverty as well as urban poverty, even though certain areas may look mildly more picturesque?

Mr. Shore: The hon. Gentleman's comments point to the difficulty of being


fair as between different categories of need. I, too, have some connections with East Anglia and I have sympathy with and knowledge of the problems faced by the people in that part of the country. I believe, however, that within our capital city the accumulation of need is greater still.

Mr. George Cunningham: Will my right hon. Friend accept that the very modest rise from 19 to 19—frac;12 per cent. in the needs element going to London this year is gratefully accepted? Does he not agree, however, that London is still receiving nothing like what it should receive under the normal needs element formula according to the needs that exist at the centre?

Mr. Shore: As a London Member myself, my heart warms to my hon. Friend's comments, but as Secretary of State I have to discipline those feelings and try to achieve a fair situation for the country as a whole. In London it is true that we have an accumulation of needs which has not before been adequately recognised. Against that situation—and we must take account of this consideration—resources are available in London of which account must be taken, and that is why we cannot give the full amount.

Mr. Speed: Will the right hon. Gentleman accept that the rate support grant, which is based on outturn, penalises the thrifty and encourages the spendthrift? Is this not something to which we should set our minds, whatever other differences there may be about the rating system?

Mr. Shore: It is a chicken-and-egg situation. Outturn may reflect actual need, and we cannot dismiss it in that way. I am always prepared to examine new bases of assessing these matters, but the hon. Gentleman will agree that it is a long, tedious and exacting business. I have not yet seen any alternative way of reducing our approach to local authority expenditure and central Government support.

Building Society Mortgages

Mr. Frank Allaun: asked the Secretary of State for the Environment if he will make a statement on his discussions with the building societies on making mortgages available to would-be purchasers

of older and poorer houses and of houses in districts at present barred by societies and to local authority sponsored applicants for mortgages; and if he will require societies to make 10 per cent. of their advances available to local authorities for the latter to grant mortgages to those unable to obtain society mortgages.

Mr. Shore: I have no power to instruct building societies to make funds available to local authorities. I hope to make an announcement in January about the arrangements for building societies' replacement of local authority lending in 1977–78.

Mr. Allaun: Will my right hon. Friend act on the latest building society statistics, which show that only 6 per cent. of mortgages are going on houses of a value of under £6,000? Is he aware that outside London many older but structurally sound houses are selling at under £3,000, and therefore that the building societies are overlooking the needs of the less affluent section of the population? Will he bring to bear greater influence on the societies?

Mr. Shore: I shall look further into the figure given by my hon. Friend, which is a low one. We have been trying to get the building societies to lend down-market. My information is that in the second quarter of 1975 they lent, on pre-1919 properties, about 17 per cent. of the total of loans. In the coresponding period this year that figure of 17 per cent. rose to 23 per cent. That indicates a move in the right direction, but I am not satisfied that the process has gone far enough.

Mr. Stephen Ross: Is the right hon. Gentleman aware that Liberal Members have considerable sympathy with the present predicament faced by the building societies? Did he read the comments made by the Chairman of the Building Societies Association that next month mortgage rates are likely to rise to over 13 per cent? Is that not unacceptable to many mortgagors? What does the right hon. Gentleman intend to do about the situation?

Mr. Shore: Rates are a matter primarily for the building societies. The dilemma which they and, indeed, all of


us face is that if rates continue to be uncompetitive, any holding down will lead to a mortgage famine and to serious hardship for many people who wish to obtain mortgages. That will affect the house building programme. Against that situation, I appreciate the adverse demand effect and the effect on the cost of living of further increases, but judgment has to be made in the light of circumstances.

Mr. Heffer: Is my right hon. Friend aware that his answer to my hon. Friend the Member for Salford, East (Mr. Allaun) will be disappointing to many people, particularly in areas such as Merseyside, which contain many older but good houses that are up for sale? I could take my hon. Friend to many areas where people wish to buy those houses, which are being sold at reasonable prices, but where they cannot obtain mortgages. Will he have further discussions with the building societies so that people can be provided with homes to assist local authorities, such as Liverpool, to get people off housing registers?

Mr. Shore: My hon. Friend, and, indeed, all Labour Members, want to see more money being provided down-market to help poorer people or those on lower incomes to buy their houses, particularly in inner city areas. We shall try to do what we can in this process. I promise the House that I shall make a statement on these matters, because I shall be discussing these problems with the building societies in January.

Mr. Rossi: Does the right hon. Gentleman agree that to bring pressure on the building societies to depart from their traditional policy of not lending to people more than they can afford to repay, or not to lend on properties that are likely to fall in value, would put at risk many small depositors in the building societies, reduce confidence, and possibly dry up the inflow of money? Would the Government not be far better served by implementing the promises which they made to the country in two consecutive General Elections, namely, to make more money available by local authority loans at the lower end of the market?

Mr. Shore: We note the cavalier way in which the hon. Gentleman approaches the subject of public expenditure. We shall try to cost his programme for local

authority lending on the scale which he regards as right. On the hon. Gentleman's main point, he is far more traditionalist than the traditional building societies. I am glad to say that the building societies do not take such a rigid and doctrinaire view about their rôle. They are much more forthcoming than the hon. Gentleman seems to think they are or should be.

Public Sector Housing (Cost)

Mr. Tebbit: asked the Secretary of State for the Environment if he is satisfied that the burden of public sector housing is fairly apportioned between tenants, ratepayers and taxpayers.

Mr. Freeson: No, Sir.

Mr. Tebbit: I am very glad of that. Is the Minister aware that in many areas it is now becoming clear that the cost of management of the housing stock exceeds income from rent without consideration of capital repayments? Does he think that this is fair to taxpayers at a time when the standard rate of tax is levied on people who are below the supplementary benefit and poverty level?

Mr. Freeson: I am sure that my right hon. Friend the Chancellor of the Exchequer has that last point in mind. I do not accept that there are many areas throughout the country where the rent income is less than the management and maintenance costs. There have been one or two cases which have been publicised in recent years, but it is wrong to take a generalised view of the matter.

Rates (Essex)

Mr. Newton: asked the Secretary of State for the Environment what estimate he has made of the likely increase in local authority rates in Essex in 1977–78, following his announcement about the rate support grant.

Mr. Freeson: I have made no such estimate.

Mr. Newton: Is the Minister aware that, if the effects of inflation and of the rate support grant are passed straight on, it will mean that in three years Essex rates will have gone up by more than 70 per cent.? This will hit many people who have already been hit by huge increases in mortgages and commuter fares.


The bitterness they feel is even greater because of the subsidising of extravagant metropolitan authorities. Is there not some other way of helping the cities without discriminating against rural ratepayers?

Mr. Freeson: We must avoid that kind of rhetorical nonsense in any sensible discussion of this matter. The recent RSG settlement cannot be extrapolated as simply as the hon. Member has suggested. It takes much more than that to decide the actual rate poundage which a particular authority will impose at the end of the day.

Mr. Newens: Is my right hon. Friend aware that the likely increase in rates in Essex and in metropolitan areas will, in fact, cause considerable hardship and will increase the incentive in certain Conservative circles to cut back even more rigorously than at present on the standard of services in those areas? Many of us who are anxious to maintain services find it extremely difficult to counter this sort of activity at the present time.

Mr. Freeson: This sort of consideration is very much in our minds, among other things. The question of levels of expenditure or standards of public services of one kind or another does not depend simply—even in the good times, let alone the difficult times we are experiencing at present—on the particular level of State support for rate expenditure. This has varied over the years and will vary in years to come.

Mr. Heseltine: The Minister says that he has not made any calculations about the rate increases in Essex. Can he, therefore, explain the purpose of publishing a detailed list of county charges showing the increase in Essex to be 19 per cent. and in many other authorities up to 30 per cent. next year as a direct result of Government policies?

Mr. Freeson: The hon. Member has not taken the point. It is not simply a question of the rate support grant settlement which decides what individual rate levels will be. There are other factors to be taken into account by the authorities concerned in deciding them, such as the level of budget expenditure, provision for inflation and balances, and in areas these will have as much, if not greater, effect as the RSG settlement.

Homeless Persons

Mr. Canavan: asked the Secretary of State for the Environment whether he is satisfied with the policies of his Department for providing for the homeless.

Mr. Armstrong: Yes, Sir. As we made clear during the debate on the Gracious Speech, the Government remain committed to legislation on this subject, and it is our wish that authorities should in the meantime continue to act in accordance with the advice in the joint circular on homelessness issued in February 1974.

Mr. Canavan: In view of the extreme anger caused by the Government's failure so far to honour their promise to introduce new legislation to make adequate provision for the homeless, will my hon. Friend state clearly whether there is or is not the slightest chance of any new legislation to this effect being introduced this Session? If not, will he say that the Government will support a Private Member's Bill to make provision for homeless families and the single homeless, who include many young people?

Mr. Armstrong: I understand the concern of many hon. Members that the homelessness Bill was not included in the Gracious Speech. However, we are committed to it and we will honour that commitment. In the meantime, if a Private Member comes forward with a Bill the Government will give it careful and detailed consideration.

Mr. Lawrence: Since it costs four times as much to subsidise a council house tenant as to subsidise a private house owner through mortgage tax relief, will the Minister stimulate the private sale market? If he did this, he would liberate a large amount of extra resources which would be a positive contribution to the relief of homelessness.

Mr. Armstrong: I cannot think of any approach that would give more anger than would that suggestion to those who are concerned with homelessness. The hon. Member's allegation is simply not true.

Rates (London)

Mr. Neubert: asked the Secretary of State for the Environment what is his


estimate of the likely average increase in rates for the Greater London boroughs as a result of his decision on the rate support grant for 1977–78.

Mr. Shore: I am not in a position to make such an estimate: but in London as a whole percentage rate increases in 1977–78 should be lower than the national average.

Mr. Neubert: Would not the Secretary of State agree that the likely outcome would depend on an extensive drawing from balances, which would be a once-off opportunity? Would this lead to a substantially higher increase in rates the following year?

Mr. Shore: I do not think so. I take the hon. Member's point, but we have made estimates about the drawing down of excess balances because local authorities rated in 1976–77 for a level of expenditure which was much higher than forecast, and which they agreed was inappropriate in the circumstances. They have cut back on that, and now most local authorities will have moneys in balance which they would not otherwise have had.

Mr. Hardy: Is my right hon. Friend aware that the gap between the rate bills faced by ratepayers in London and those in the rest of the country has narrowed since local government reorganisation? In recent exchanges from the Opposition Front Bench there has been no reference to the pledge that the Opposition made last year to abolish domestic rating. If they had mentioned this, it would compound the problem which Opposition spokesmen have mentioned this afternoon.

Mr. Shore: I am grateful to my hon. Friend for mentioning that. We would be interested to hear at a later stage what the Opposition have to say about that. My hon. Friend is quite correct: there has been some narrowing of the gap between the rates in London and elsewhere, but it was a very large gap indeed. It needed to be narrowed, and the need for further narrowing will continue.

Local Government Expenditure (Layfield Report)

Mr. Silvester: asked the Secretary of State for the Environment whether he intends to act upon the Layfield Report on local government expenditure.

Mr. Shore: As I told the House on 19th May, before taking any decisions on the Layfield Report the Government first want to consider the views of the public and interested bodies. I asked for comments by the end of November. We are pressing ahead with our studies of the report and the comments now put to us. I shall announce decisions as soon as we are in a position to do so.

Mr. Silvester: As we are now in December, may we look forward to a very early reply in view of the fact that the present situation with the rates is causing very great concern and is likely to get worse? Will the Minister indicate whether he is providing us with an alternative source of local government finance to take the strain away from the rates?

Mr. Shore: I cannot answer that in the way the hon. Member would wish. The Layfield Report put forward a particular proposal for a new source of income for local government in the form of local income tax. The Conservatives have attacked this and I am still considering it, although I am well aware of the difficulties involved. I remind the hon. Gentleman that it is only seven days since we received all the comments which we invited on this matter, and I am still digesting these and thinking about them.

Mr. Blenkinsop: Does my right hon. Friend agree that the only basis on which there is any possibility of ever introducing a local income tax is a regional basis? Will he therefore encourage the Government to bring forward their proposals for the regions of England as well as the proposals for devolution in England and Wales?

Mr. Shore: My hon. Friend may be leading me far from the question of local government, but on the other hand he may not. I advise him to await publication of the White Paper on devolution in England, which I hope is now virtually upon us.

AIRCRAFT AND SHIPBUILDING INDUSTRIES BILL

(MR. SPEAKER'S RULING)

Sir M. Havers: On a point of order, Mr. Speaker. May I now amplify the point of order of which I gave you notice last night? It arises from the construction of Section 2(4) of the Parliament Act 1911 in relation to the Aircraft and Shipbuilding Industries Bill. That Act provides in that section:
A Bill shall he deemed to be the same Bill as a former Bill sent up to the House of Lords in the preceding session if, when it is sent up to the House of Lords, it is identical with the former Bill or contains only such alterations as are certified by the Speaker of the House of Commons to be necessary owing to the time which has lapsed since the date of the former Bill or to represent any amendments which have been made by the House of Lords in the former Bill".
So we face three situations. They are that the Bill is identical with the Bill as it left this House at the end of Third Reading on its first occasion; or, for example, the date of 1976, because of the delay, has now to be made 1977; or the third case, in which the new Bill now before this House represents any amendment which is otherwise identical to an amendment which had been made by the House of Lords.
In my judgment this Bill does not comply with these requirements in the sense that in one case a Lords amendment has been amended by this House and is in the new Bill, and in three cases Lords amendments were rejected by this House, and then this House made amendments in lieu which are in the Bill. I must tell you, however, Mr. Speaker, that in all these cases, when these amendments were sent back to the other place, the other place agreed to the amendments made by this House. All these amendments are now in the new Bill which was before this House and which received its Third Reading last night.
It seems to me that the question is this: can a Commons amendment in lieu of or varying a Lords amendment, and then subsequently agreed to by the Lords in a previous Session, be in accordance with the 1911 Act and be, to paraphrase that section, such an alteration as is certified by you, Mr. Speaker, as to represent any amendment which has

been made by the House of Lords in the former Bill in the previous Session?
Amendments made by the Lords cannot in my view be amendments made by the Commons and agreed to by the Lords. The very wording of the Act prevents that. That must mean an amendment originating in the Lords, not one originating here and subsequently agreed by the Lords. Commons amendments are not made by the Lords; they are merely agreed by the Lords. That was clearly in the minds of the draftsmen when they prepared the Act, because, in the proviso, provision is made for the occasion on which the Bill comes back to this House in the succeeding Session, and there suggested amendments are provided for. If these amendments are agreed to by the Lords they are treated as being amendments made by the House of Lords in those special circumstances.
Thus, any amendment by the Commons and agreed to by the Lords in a previous Session can be put forward as a suggested amendment the second time around, and if that is done it avoids the difficulty which has arisen in the Bill as it is now drafted. If the Lords' agreement to a Commons amendment in the previous Session had been intended, when the 1911 Act was drafted, to be covered by the statute, that Act would have read, not
to represent any amendments which have been made by the House of Lords in the former Bill
but
to represent any amendments which have been made or agreed by the House of Lords in the former Bill
This in my view completely clinches the argument, since the passing of an amendment is in each case a separate step in the progress of the Bill. One step in the progress of the Bill is the passing of an amendment by one of the two Houses of Parliament. This requires the other House to adopt one of four courses. It must accept the amendment as it stands, reject it out of hand, amend it by another amendment, or substitute it by an amendment in lieu of the amendment which was passed by the other House.
If that amendment is not accepted or agreed to it becomes another amendment by the House which passes it—in this case, in respect of these four amendments, the House of Commons. If it is by the House of Commons, I come back to the


easy point that it cannot be an amendment by the Lords, even though they later agreed to it.
It follows, therefore, in my submission, that this Bill does not comply with the requirements of the Parliament Act. It should not be so certified by you, Mr. Speaker, under the Parliament Act, and for you to certify it would strain the language of the Act by going outside the plain and ordinary meaning in the Act itself.

Mr. Speaker: I am grateful to the hon. and learned Member for Wimbledon (Sir M. Havers) and to his colleagues for having given me notice last night and again this morning of the substance of the matter that he has just raised in the House. It has enabled me to give full and careful consideration to the important issues involved.
The submission by the hon. and learned Member is based on the construction to be given to Section 2(4) of the Parliament Act 1911 as amended by the Parliament Act 1949 which, for the convenience of the House. I shall quote in full:
A Bill shall be deemed to be the same Bill as a former Bill sent up to the House of Lords in the preceding Session if, when it is sent up to the House of Lords, it is identical with the former Bill or contains only such alterations as are certified by the Speaker of the House of Commons to be necessary owing to the time which has elapsed since the date of the former Bill, or to represent any amendments which have been made by the House of Lords in the former Bill in the preceding Session, and any amendments which are certified by the Speaker to have been made by the House of Lords in the second Session and agreed to by the House of Commons shall be inserted in the Bill as presented for Royal Assent in pursuance of this section:
The hon. and learned Member contends that in the case of the Aircraft and Shipbuilding Industries Bill, which was given its Third Reading last night, it would not be proper for me to give my certificate under the Parliament Acts to a form of the Bill which included in it three amendments made by the Commons in lieu of Lords amendments and agreed to by the Lords, and one amendment made by the Commons to a Lords amendment and agreed to by the Lords.
The question I have had to decide is whether such amendments made by the Commons either in lieu of or to Lords amendments, and subsequently agreed to by the Lords, represent Lords amendments

for the purposes of the Parliament Acts. In this matter—as in so many of the matters connected with this Bill—I have no precedent to guide me, and I must apply common sense to the construction of the statute.
I must point out here that "represent" is the operative word used in the subsection. I am of the firm view that if the Lords accept a Commons disagreement to one of their amendments and at the same time accept a Commons amendment in substitution, or if the Lords accept a Commons amendment to one of their amendments, then there is no doubt that the Commons amendment so accepted, or the Lords amendment, as amended so accepted, represents in the fullest sense the original Lords amendment.
What must be borne in mind is that whether the Commons seek to make an amendment in lieu of a Lords amendment, or seek to amend a Lords amendment, it is part of a continuing process of the consideration of Lords amendments. In other words, a Commons amendment in lieu of a Lords amendment, or a Commons amendment to a Lords amendment, could not exist without the original Lords amendment. In the final stage of agreement by the Lords it represents the Lords amendment and is therefore proper to be covered by my certificate under the Parliament Acts.
The hon. and learned Member referred to the proviso under Section 2(4) of the 1911 Act whereby the Commons may suggest further amendments to the Lords. I accept that this machinery could have been used to cover the disputed amendments in this case, but I am of the opinion that it was not necessary to do so in as much as the amendments are fully covered by the preceding words of the subsection.

MR. PATRICK MEEHAN

The Secretary of State for Scotland (Mr. Bruce Millan): With your permission, Mr. Speaker, and that of the House, I should like to make a statement.
On 19th May 1976, I made a statement in the House of Commons informing the House that, in the light of material, including fresh information, available to me, I was advising Her Majesty to


exercise the Royal Prerogative of Mercy to grant a free pardon to Patrick Meehan who had been convicted in October 1969 of the murder of Mrs. Rachel Ross.
Lord Robertson, in his summing-up to the jury on 1st December in the case of Ian Waddell, made remarks which were strongly critical both of my decision to advise Her Majesty to grant a free pardon to Patrick Meehan and of the use of the Royal Prerogative of Mercy in general.
I have now studied his remarks in their context and I reject his criticisms. The existence of the Royal Prerogative of Mercy is an integral part of the constitutional system which exists to protect the citizen against a possible miscarriage of justice. The Secretary of State should not hesitate to recommend the exercise of that power if he has substantial grounds for believing that a miscarriage of justice may have occurred for which there is no remedy available in the courts. This was the basis on which I acted in the Meehan case.
In taking such a serious decision, I was not "paying attention to clamour" as might be implied from Lord Robertson's remarks. I came to the conclusion, on the information available to me, not all of which was before the court in the Waddell trial, that it was no longer right that Patrick Meehan should be held in prison on conviction of the murder of Mrs. Ross. That remains my view.
Lord Robertson stated that I did not exhaust the "obvious process of law" by referring the case of Patrick Meehan to the Court of Criminal Appeal. A reference by me under Section 263(1)(a) of the Criminal Procedure (Scotland) Act 1975 is, of course, the only process by which the case could have been brought again to a court of law for judicial determination.
As I explained on 19th May, I examined this possibility before deciding to advise the exercise of the Royal Prerogative. But, in terms of that provision, the court is limited in the extent to which it can consider a case afresh since it must hear the reference as though it were an ordinary appeal against conviction. Having regard to the nature of

the considerations relevant to a decision on the case, I reached the conclusion that my powers of reference back were inappropriate to it.
The decision to recommend the exercise of the Royal Prerogative of Mercy in the case of Patrick Meehan was mine and mine alone. The decision to prosecute Ian Waddell, which depended on different considerations, was not mine but a matter solely for my right hon. and learned Friend the Lord Advocate.
I am aware that during the Waddell trial questions were raised as to what was the precise effect in law upon a conviction of a grant of Free Pardon in the exercise of the Royal Prerogative of Mercy. These questions can be authoritatively determined only by a court of law. But it is generally accepted—and this was the view stated by Lord Dilhorne in the other place on 19th March 1963, when he was Lord Chancellor—that it means that the conviction and all its consequences are wiped out and that persons who receive free pardons are to be regarded as being in the position of having been acquitted at trial.
I have only this morning received a full copy of the judge's charge to the jury in the Waddell trial. I propose now to consider the issues arising from the two trials and whether, and in what form, further inquiry might throw new light on any of these issues.

Mr. Buchanan-Smith: We are grateful to the right hon. Gentleman for making what is an important statement. Leaving aside the timing of Lord Robertson's remarks, surely Lord Robertson was right that, where the defence was based on Meehan having committed the crime, the charge to the jury to disregard the effect of the pardon was, indeed, a right one? Secondly, is the right hon. Gentleman aware that, despite the gloss that he has put on it, the whole matter of the effect of the pardon is one that requires still further clarification?
Thirdly, is the right hon. Gentleman also aware that because of the general concern over the conduct of the Crown Office in this case, and its handling of it, we would expect a statement from the Lord Advocate? Finally, can the right hon. Gentleman be more specific about his reference to an inquiry?

Mr. Millan: I am not sure that I followed the hon. Gentleman's first comment. With regard to the hon. Gentleman's second comment, I have said that the precise effect of a pardon is a question which can be authoritatively determined only by a court of law. I thought that it would be helpful to the House, and helpful generally, if I were to give a statement of the view expressed by Lord Dilhorne, as Lord Chancellor, in the other place in March 1963.
The hon. Gentleman's third question is in some respects a matter for the Lord Advocate rather than for me. The Crown's handling of these cases is a matter that I would consider in the context of the possible inquiry. On the inquiry itself, the House will appreciate that this is an extremely difficult matter to decide given that there already have been two trials. I do not wish to make a quick decision. But I understand that there is a great deal of public concern about a number of matters arising out of these trials and I shall come to a conclusion as soon as I possibly can.

Mr. David Steel: Will the Secretary of State accept that the Liberals, for their part, accept his statement without equivocation? It should be welcomed by the House as a whole.
We wholly reject the underlying claims to judicial infallibility which seemed to lie behind so much of Lord Robertson's summing up. May I ask the Secretary of State whether his concluding remarks in the statement means that he has not ruled out the possibility of a full inquiry which would include the circumstances leading to the prosecution of Mr. Meehan in the first place?
Lastly, would the right hon. Gentleman confirm that in his rôle as Secretary of State he considers that he remains fully answerable for his actions to this House and not to any of Her Majesty's judges?

Mr. Millan: I am grateful for what the hon. Gentleman said in his concluding remarks and also for what he said at the beginning. The question of an inquiry is one of considerable difficulty. Obviously questions pertaining to the circumstances before the original prosecution was brought against Meehan are matters that I am considering in the context whether there ought to be an inquiry. I do not

want to be drawn further today into the possible coverage, or terms of reference, of an inquiry if I were to decide to have one.

Mr. William Ross: Is my right hon. Friend aware that we welcome his statement and regret that it was necessary? It cannot but be detrimental to Scottish justice for a judge when directing a jury in a very important trial so to misdirect it about the duties and rights of the Secretary of State in recommending to Her Majesty the exercise of the Royal Prerogative. Will my right hon. Friend seek a meeting with the Lord President of the Court of Session, so that the Lord President may remind his colleagues on the bench that the exercise of the Royal Prerogative is, and I trust will remain, an essential safeguarding part of our legal system?
Will my right hon. Friend ask the Law Society of Scotland to examine and report on the question of confidentiality, when a solicitor who represents two men can have in his possession from one man an alleged confession to the murder for which his other client has been found guilty?
My other question, which I consider to be a matter of growing seriousness, concerns the BBC's practice of pre-recording statements, interviews and comments from various people connected—and not too well connected—with a trial, before the end of that trial, statements and so on which, in the light of the ultimate verdict and summing up, may prove to be widely irresponsible and inaccurate.

Mr. Millan: I shall look into my right hon. Friend's last point, although it may concern matters of law and not matters for me as Secretary of State.
I understand that the question of confidentiality between solicitor and client is not just a matter of professional practice or a question of the view that the Law Society of Scotland may take. There may be legal implications as well. But, as I said when I made my original statement in May, I would welcome clarification, as I think the House would.
On the question of the Royal Prerogative, I hope that I have made clear the Secretary of State's duty in such a case. I had not understood until about a week ago that there was any question about the validity of the Royal Prerogative.

Mr. Fairbairn: I declare an interest, in that I was Mr. Meehan's counsel at his trial and impeached Mr. Waddell as the offender at the trial, which impeachment was removed from consideration by the trial judge at the time. I commend the probity, judgment and correctness of the Secretary of State's behaviour in commending to Her Majesty that she use the Royal Prerogative of Mercy according to law.
May I ask the right hon. Gentleman to repeat in the House that, whatever Lord Dilhorne may have pronounced as the law, the recommendation was that Meehan's conviction should be expunged and that he stands innocent of that crime? In that connection, will the Secretary of State use his good offices to recommend to Her Majesty that the wording of the exercise of the Royal Prerogative be put in such form that it does not mislead such intelligent men as Lord Robertson?
May I also ask that nothing that Lord Robertson has said, done or thought shall in any way diminish the proper damages which Mr. Meehan will receive for his wrongful conviction and imprisonment? Will the right hon. Gentleman consider the very serious constitutional issues where a judge in a privileged position is able to defame the reputation of a man whose conviction has been expunged, accuse him from a privileged position, without evidence, of defaming police officers, and gratuitously defame the holder of the office of Secretary of State and the Lord Advocate?
In view of the very serious evidence at the trial that there was in the hands of the police, evidence for which the defence asked and which was suppressed, may I ask that there will be a full public inquiry in order that we may ensure, without prejudice to the trial of any police officer who may be charged, that justice is seen to be done and is openly displayed on the full facts, which the Lord Advocate, because of the rules of evidence, could not bring out. May I ask that the whole matter may be put before the public, so that they may see the rightness of the course which the Secretary of State took.

Mr. Millan: As I have said, I am considering an independent inquiry.
I probably said in my original statement this afternoon all that it is necessary

for me to say about Lord Robertson's charge to the jury.
On the question of damages to Patrick Meehan, I shall take advice from an independent assessor. I had taken preliminary action before the Waddell trial, and I now want to bring that matter to a conclusion as soon as I can.
I gather that the wording of the Prerogative is a matter of considerable antiquity and that to change it would require legislation. I am not sure that that is necessary, because I think the general understanding has been that a person who obtained the Royal Prerogative was in exactly the same position as he would have been if he had been acquitted at the trial. The hon. and learned Gentleman has confirmed that my actions over the recommendation of the Royal Prerogative were fully within the law.

Mr. Buchan: Many people will not only welcome my right hon. Friend's statement but will congratulate him on it and on his earlier advice on the Royal Prerogative. Will my right hon. Friend place in the Library of the House the judge's charge to the jury? Apart from the judge's words on the precise definition of the pardon, it caused many worries with the additional remarks, especially the extraordinary remark that a pardon could be given only if an offence had been committed, which would suggest that an innocent man could not be pardoned. Would it be worth while considering the possibility of refresher courses for some of Her Majesty's judges? Does my right hon. Friend accept that the matter cannot rest here? I hope that he will push forward with his idea of an inquiry which I hope will be as public as possible.

Mr. Millan: I note what my hon. Friend and other hon. Members have said about an independent inquiry. I shall try to make available to hon. Members a copy of the judge's charge to the jury.

Mrs. Winifred Ewing: I congratulate the Secretary of State on his courage in granting the pardon. He must in the end hold an inquiry, whether or not it is difficult to do so, because there is public disquiet, which will not be lessened by delay. That disquiet is as strong as it was at the time of the Oscar Slater case,


when it arose over witnesses for the defence who were in the waiting room but were not called. The disquiet this time is over the Crown witnesses in the Waddell case who were in the waiting room and were not called.
The longer the Secretary of State delays the more the disquiet will grow. The inquiry will have to be held in the end, however painful a decision it may be for the Secretary of State. I urge him to grasp the nettle and to take the decision early.
At the end of his statement, the Secretary of State said that he proposed to consider the issues. As a member of the legal profession, I never thought that I should have to say it in the House, but one of the issues must be what one does to discipline a judge who holds his function ad aut vitam aut culpam. If the remarks by Lord Robertson are not an example of culpam, I cannot imagine what on earthculpamin a judge is. In the long history of Scottish judges, we have rarely had a judge removed, but I suggest that this is a case where Lord Robertson's removal from the Bench should be seriously considered by the Secretary of State.

Mr. Millan: The hon. Member for Moray and Nairn (Mrs. Ewing) has made a number of remarks which are not for me to comment on. I shall take the decision about an inquiry as soon as I reasonably can. I recognise that there is public disquiet and that that public concern should be allayed.

Mr. Abse: May someone from outside Scotland put a question? In view of the heavy criticism that has already been made against the judiciary, indicating considerable conflict between legislators and the judicature, would the Minister agree that the problem has arisen, as he has indicated, because of the failure of the courts to have powers to review cases in a form and manner which would enable the Minister to refer them for proper surveillance and scrutiny?
Unless the Secretary of State, after discussion with other Ministers, is prepared to introduce legislation to change the powers of the courts, we could have other instances in which the murky underground of Scotland could so manipulate

events that there could be this unseemly picture which we have seen this afternoon, with attacks on the judiciary which may or may not be as well founded as they at first appear.
Would it not be advisable for consideration to be given to the powers available to Scottish courts so that we do not have the same miserable type of episodes and occurrences as are now taking place in the House?

Mr. Millan: I am not aware of having made any attack on the judiciary and I would not wish to do so. The question of criminal procedure in appeal has already been considered by the Thomson Committee on Criminal Procedure in Scotland, which reported a considerable while ago. I am willing to look at its recommendations and to consider whether the law should be changed but this is a very difficult field and the Thomson Committee was itself divided on its recommendations.

Mr. Hooson: As criticism by a judge of the exercise of the Royal Prerogative is a very important constitutional matter, can the Minister tell us, on a matter of procedure, whether, when he recommended the pardon, he informed the Lord President in Scotland of the grounds on which the recommendation was made?

Mr. Millan: I do not have to give reasons for my decisions, even to the Lord President. But I think he was aware of the decision before it was announced. The trial judge was dead and therefore could not be consulted, even informally. I have been asked once or twice this afternoon to raise some matters with the Lord President and I am certainly willing to talk with him about some points.

Mr. Lambie: In view of the statement made today by the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn), how does the Secretary of State intend to deal with the allegations made against the Ayrshire police by the hon. and learned Gentleman and his less reputable friends in following a campaign of vilification against the police?

Mr. Millan: Allegations against the police, some of which were rehearsed at the Waddell trial, are among the issues


I want to consider before making a decision about an independent inquiry.

Mrs. Winifred Ewing: On a point of order, Mr. Speaker. Did I hear the hon. Member for Central Ayrshire (Mr. Lambie) refer to the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) and his "less reputable friends"? Could we have clarification? To whom was he referring?

Mr. Speaker: Order. I do not think that the hon. Lady the Member for Moray and Nairn (Mrs. Ewing) heard that. The hon. Lady may have heard it but I did not. Did the hon. Member for Central Ayrshire (Mr. Lambie) make that remark?

Mr. Lambie: Yes, I did, Mr. Speaker, and I stick by it.

Mr. Speaker: It appears that the hon. Lady did hear those words used. I did not.

Mr. Lambie: I stick by them, Mr. Speaker.

Mr. Fairbairn: Further to that point of order, Mr. Speaker. May I assure the House that I have no friends? But if I am compelled to refer to the hon. Member for Central Ayrshire (Mr. Lambie) as a friend, he is undoubtedly one of my less reputable ones.

Mr. Thompson: The Secretary of State said that legislation would be needed if we were to change the title for the exercise of the Royal Prerogative as it affects a person now judged to be innocent. Would the Minister accept that if the Government brought forward a short Bill such as the Returning Officers (Scotland) Bill to remove this defect in the law—and I am sure that lawyers could find better words to express the meaning of the free pardon—the House would give a rapid passage to the Bill in order to remove any further doubt on this matter?

Mr. Millan: I am doubtful whether the House in its present mood would give a rapid passage to anything. There would be some difficulty in this but I will consider it.

Several hon. Members: rose—

Mr. Speaker: I intend to call only those hon. Members who have already stood up, and nobody else.

Mr. Canavan: Is the Minister aware that many people who are concerned about the administration of justice fully support his original decision to release Patrick Meehan and that they support everything the Minister said in his statement this afternoon? They absolutely deplore criticisms levelled at the Secretary of State by Lord Robertson. In view of all the circumstances, would it not be appropriate for this interfering busybody of a judge to apologise to the Secretary of State or else to resign?

Mr. Robert Hughes: Since it is clear that the breaking of the confidentiality rule played a large part in the Minister's original decision, does he now consider that this is a matter which ought to be discussed by the Royal Commission on the Law in Scotland?

Mr. Millan: It is within the terms of reference of the Royal Commission. If the Royal Commission cared to consider it and to take evidence on it, all of us would be very grateful.

Lord James Douglas-Hamilton: I apologise to the Secretary of State for missing part of his statement. Will the Minister ask the Government to introduce legislation so that when evidence of a new character comes to light, showing that a person may be innocent, there will be a procedure for a retrial? Such procedure exists in England but not in Scotland, and it would be to the benefit of Scotland to introduce it there.

Mr. Millan: Some of the matters were dealt with by the Thomson Committee, but there are some very difficult points, and I do not think that it would be sensible for me to pronounce on them this afternoon in any authoritative way.

Mr. Douglas-Mann: Will the Secretary of State ensure that the Royal Prerogative is not exercised less frequently in future as a result of this criticism? Will the Minister confirm that it is proper for the Royal Prerogative to be exercised when real doubts arise as to the justice of a sentence passed. There is a possibility, and it is right that occasionally a guilty man should have the Royal Prerogative exercised in his favour.

Mr. Millan: I intend to discharge the duties laid upon me in recommending the


Royal Prerogative in the same way in the future as I have tried to do in the past.

Mr. Speaker: Since there has been criticism of the judiciary, I should tell the House that what has guided me in the control of the debate has been what my predecessor said on 4th December 1973 when he quoted Lord Atken, whom he described as one of the great judges of the century, who said:
But whether the authority and position of an individual judge, or the due administration of justice is concerned no wrong is committed by any member of the public who exercises the ordinary right of criticising, in good faith in private or public, the public act done in the seat of justice. The path of criticism is a public way, the wrong headed are permitted to err therein: provided that members of the public abstain from imputing improper motives to those taking part in the administration of justice, and are genuinely exercising a right of criticism, and not acting in malice or attempting to impair the administration of justice, they are immune. Justice is not a cloistered virtue: she must be allowed to suffer the scrutiny and respectful, even though outspoken comments of ordinary men."—[Official Report,4th December 1973; Vol. 865 c. 1092.]
That has been the tone that I have tried to see adopted this afternoon.

SOCIAL SECURITY (CONTRIBUTIONS)

Mr. Boscawen: On a point of order, Mr. Speaker. It is becoming a regrettable practice of Ministers increasingly to announce large increases of taxation of the citizen by means of Written Answers or by the laying of Orders and not coming to the House so that they can be questioned. I refer in particular to the laying of the Order which raises £150 million in increased social security contributions, which fall mainly on the self-employed and those earning more than £95 a week and for which they get no extra benefit. Is there nothing you can do to encourage Ministers who are raising these large sums of taxation to do the House the courtesy of coming here to make a statement so that they can be questioned on what they are doing?

Mr. Nott: Further to that point of order, Mr. Speaker. Is it correct practice and in accordance with our traditions for the Secretary of State to make an announcement about a very large increase in taxation and not to come to the House the next day—which is the most convenient time for him to do so—and

make an oral statement? The National Insurance Fund is in substantial credit and these extra contributions are not required for the purpose of insurance. They are a pure tax increase. Can the Leader of the House say why the Secretary of State has not come to the House to make a statement about increased taxation in the normal way?

Mr. George Cunningham: Further to that point of order, Mr. Speaker. Will the Leader of the House bear in mind that much of the irritation on this kind of point arises because of the use of the inspired Written Question and that at least half the irritation would disappear if we adopted the practice of written statements in substitute for some Written. Answers, though never for oral statements?
Does my right hon. Friend recall that the Select Committee on Procedure of the 1970–74 Parliament recommended that this should become a new procedure of the House? Will he give it his support so that we do not have these complaints every fortnight?

Mr. Ridley: Further to that point of order, Mr. Speaker. Two long ministerial, speeches were made on Monday on the subject of national insurance contributions and it would have been possible for this announcement to be made to the House at that time so that hon. Members could question Ministers about it. The fact that the statement was not made then but was released the next day in a Written Answer suggests that the Government had come to a conclusion but deliberately deceived the House by not announcing what they had decided. That makes it all the more regrettable that they gave a Written Answer last night and that the Minister did not come to the House and subject himself to Oral Questions from hon. Members.

Mr. Skinner: Further to that point of order, Mr. Speaker. Might I suggest to the Leader of the House that he takes account of the fact that not only is £150 million to be raised in this manner, but that there is already a £932 million surplus on the National Insurance Fund, and I believe that it will still be in excess of £850 million in the next financial year. Could he use his good offices, through the Chancellor of the Exchequer, to inform the IMF that, in view of this surplus, it need not get on our backs so much?

Mr. Speaker: The hon. Member who began the points of order referred, I presume, to Statutory Instruments Nos. 11 and 12 in yesterday's Votes and Proceedings. It is not for me to say whether a Minister should make a statement before laying such instruments, but I should point out that both instruments are subject to debate. The first is subject to the negative procedure and the second requires the affirmative procedure before it comes into force.

DIVISIONS (MEMBERS' ATTENDANCE)

Mr. David Steel: On a different point of order, Mr. Speaker. I am sorry that I have not given you advance notice of this matter, but since I am not asking for an instant response, I hope that you will acquit me of any discourtesy.
You have several times said that pairing and nodding through the Lobbies are not matters for you, but I believe that an incident which occurred yesterday is a matter for you. My hon. Friend the Member for Inverness (Mr. Johnston) who was ill, was called from his bed in order to vote, because a member of the Government, even though he was in the same condition, was kept here. The public may think that we are a little odd in the way in which we conduct our affairs.
My point of order is that I was told that my hon. Friend could not remain in his office and be nodded through the Lobby because his office is in the new building in Norman Shaw North, which is still outside the precincts of the House. It seems to be a matter which should be drawn to your attention if hon. Members cannot remain in the privacy of their own rooms because we have extended the premises. How can we extend the definition of the precincts of the House so that hon. Members may remain in reasonable comfort when they are brought here even when, in my view, that is done unnecessarily?

Mr. Speaker: I shall look into the matter raised by the Leader of the Liberal Party, but the usual channels will have heard what has been said. I should have thought that, in the first place, it is a matter for reasonable and compassionate understanding.

NATIONAL INSURANCE SURCHARGE BILL (BUSINESS MOTION).

Motion made, and Question proposed,
That, notwithstanding the practice of the House relating to the interval between the various stages of Bills of aids and supplies, more than one stage of the National Insurance Surcharge Bill may be proceeded with at this day's sitting.—[Mr. Tinn.]

4.17 p.m.

Mr. David Howell: Having dealt a moment ago with increases in employees' contributions, we should make clear on this motion that we also find the Government's handling of the increased employers' contributions under this Bill highly unsatisfactory.
As my hon. Friends made clear on Monday, we do not accept the case for this measure being rushed through. We can see no reason for having only 48 hours between Second Reading and remaining stages and we have to ask why, if the Prime Minister has not had time during the past two days to see the Archbishop of Canterbury, the House should find time to debate this Bill now.
The difficulties with which this procedure faces us are obvious. It has given us no time to consult outside and to take account of the many interests affected. It has given us very little time to draft detailed amendments to various parts of the Bill, and this in turn has created further difficulties. The Ways and Means Resolution has made the drafting of amendments which are in order very difficult, and we shall be seeking to raise this issue in Committee. The Ways and Means Resolution has effectively excluded debate on a large number of important points and has meant that we have had no time to devise alternative amendments which might be in order and not be pushed out by its terms.
This means, in effect, that for many interests—primarily the thousands of people working for charities and hundreds in the Churches—there has been no opportunity to debate these matters because of the device which the Government have sought to adopt. This is a disgraceful device. I do not fully understand it, and I do not think any hon. Members understand it. Certainly people in charities do not understand why the Government find it necessary to use this device.
What is the motive for this particular trick? Why are the Government so anxious that we should not discuss the Spastics Society, Dr. Barnardo's, or the Church of England? Such people will have to go out and raise thousands of pounds more money or, alternatively—I suspect that this is more likely to be the outcome—they will have to lay off charity workers before we are very long into the next financial year.
We do not understand the Minister's motives for suppressing discussion of the Bill. We object very strongly to the way in which it has been rushed. We do not accept at any point the validity or integrity of the arguments used by the Leader of the House, or Ministers, for cramming this whole legislation into two days. We note that thereby all awkward debate is avoided outside on the effect of these measures in adding to the Government's already successful, fast-rolling job destruction programme.
This measure will help to destroy a good many more jobs, so at least we understand why the Government wish to rush it through. The reason is clear enough. When the Leader of the House tells us that he will fight unemployment with every breath in his body, we have to say that this is a very odd way of doing so. What he will be fighting for today is for anything between 10,000 and 110,000 more unemployed, particularly in the textile industry, in construction, and in charities and Churches if they cannot raise the extra money. This is a very odd way of fighting unemployment with every breath in the right hon. Gentleman's body. We object very much to the way in which the motion is being pushed through. I shall invite my hon. Friends to divide the House against this disgraceful piece of skulduggery.

4.33 p.m.

Mr. Nicholas Ridley: I think it extraordinary that practically every day now we have some vile business motion put on the Order Paper by the Lord President of the Council. He must be developing a sort of routine, spending the afternoons listening to abusive language being directed against him for what he has done, and then skulking off to devise the next motion for the next day. He must have some very clever draftsmen helping him to

devise motions which will force Government business through the House and truncate opportunities for debate. He is becoming quite expert at finding ways of forcing legislation through and shortening opportunities for debate.
This is a very novel measure. It is a new form of taxation, not just the usual increase in national insurance contributions which we have had year after year, nor a change in the form of them. This is a new form of tax which is to be paid into the Exchequer for purposes other than the payment of pensions.
It is quite intolerable that a new form of taxation should be introduced on Monday, get through its remaining stages on Wednesday and, if I have anything to do with it, be buried on Thursday like Solomon Grundy. Unfortunately, there will not be an opportunity to bury the tax tomorrow, although I am sure that the Lord President could devise a business motion to enable us to do so if he wanted.
What worries me is that every Bill will in future come in with a built-in timetable and a built-in compression of the stages for debate, so with any luck we shall be able to get the Bill through in a day without a Committee stage, finish debate at 10 o'clock and send Parliament home. I know that the Lord President did very badly with his Bills in the last Session, losing the Aircraft and Shipbuilding Industries Bill, having the Dock Work Regulation Bill emasculated, losing the Road Traffic (Seatbelts) Bill, the Public Lending Right Bill, the British Transport Docks (Felixstowe) Bill, the Greater London Council Bill, the West Midlands County Council Bill. No wonder he is a bit sensitive to the demands of Parliament to debate this obnoxious measure, because he had a lousy record. He was jolly lucky in the last re-shuffle not to lose his job.
He is the most incompetent Leader of the House we have ever had when it comes to getting Bills through, so perhaps he said "Next term I must do better." Every day we have these motions forcing through the Government's business. So long as he can cling on to a majority of one or two, by which he succeeds in carrying these motions and Bills, the procedure can apparently continue for ever.
If he wants to close the debate early in the evening by some timetable motion, he is less likely to have a by-election on his own side because he is keeping the troops in good heart with plenty of sleep and plenty of fodder to survive the long winter ahead.
So this is the strategy of the Leader of the House. Soon, if the motion is carried, he will go down the Corridor to where his advisers will be waiting, and they will say "Lord President, the business is so and so—you might be able to get it through by tea time if you put down this motion. We might be able to do without a Committee stage if we put down that motion." They will be preparing further motions to put on the Order Paper.
We have one fortunate feature in our procedure, which is that the procedural motions are taken first. I hope the Lord President is getting fed up with seeing that the type of item of business, both in Hansardand in the Press next morning, is his own aberrations of business motions that he has put down. In the end this should surely alert him to the fact that he is attracting much adverse publicity for the way in which he is handling Parliament. The right hon. Gentleman is not being thought to be a very good Leader of the House and from the debates we have day after day I am sure that my hon. Friends would agree it could not be said with the certainty with which I have heard it said of previous Leaders of the House that he shares the confidence of all quarters of the House in his fair and impartial conduct of the Government's business.
Why should this taxation measure not have had a decent interval between the Second Reading and Committee stage? There is no reason whatever why it should not spill over into the period after Christmas, or even the week before Christmas. Perhaps we might even postpone the devolution Bill. The devolution debate will take 80 days and 80 nights, or whatever it is, so moving this Bill back one day to let hon. Members consult their constituents and to consider amendments would not have done any great harm. Why should there be this unseemly rush? Why do the Government so wish to restrict the scope of discussion on the Bill by the Ways and Means Resolution?
I beg the Leader of the House to understand that he cannot go on coasting through on his past reputation as a lover of this House and a great parliamentarian. The good will he has stored up is not only eroded but is becoming a negative good will. This is something which no Leader of the House should wish to court. I shall register once more my daily protest against the procedural motions of the Leader of the House and hope that, patient though he is at sitting on the Bench, his ears will be open this time and he will draw the necessary conclusion.

4.28 p.m.

Mr. William van Straubenzee: I shall intervene quite shortly on what is a narrow, but to me a very important, point. My point is well illustrated by the state of the Order Paper at the moment, and particularly the list of amendments which have been selected for debate, which I shall not discuss now. They illustrate well the dilemma in which the Leader of the House has put so many hon. Members who are genuinely interested in this difficult matter and anxious to make a contribution to the debate.
I had reason to suppose that on Monday evening the Minister who was winding up the debate might say something which would be of interest to some of my concerns. He answered, but his reply was clearly not a sufficient answer from my point of view. I am only an ordinary Back-Bench Member, without the facilities of the Government; nor do I have the brightness of those on my own Front Bench—particularly those who are here this afternoon—and I can only table an amendment bearing on the point mentioned by the Minister when winding up.
Therefore, as you can see from the state of the Order Paper, Mr. Deputy Speaker, I find myself in a difficult position, having acted as swiftly as any ordinary Back-Bench Member could reasonably be expected to do, with a starred amendment. I quite understand that when the House goes into Committee—and again, we must not forecast in this debate—it may be impossible for a starred amendment to be considered, or ever to have been considered for selection.
This is a very difficult position for an hon. Member. At least if we had one further stage instead of all the stages today there would be some opportunity for Back-Bench Members with legitimate concern and interest to seek to highlight the matter by way of an amendment. As it is, we are totally unable to do so.
I wonder whether the Leader of the House understands the incredulity that exists outside the House on the part of a large number of those concerned with what they regard as tax, even if it not technically a tax, about our procedures when it comes to the sort of process that I have outlined. The Leader of the House will know that I have been in close consultation with some of those concerned. I know that they are very anxious not to play up certain recent episodes. However, perhaps I may say as an aside that it seems to be a quite extraordinary method of carrying on. No doubt if Mr. Jack Jones had requested an interview, it would have been granted instantly. However, I let that be.
Perfectly law-abiding citizens, people such as the Church Commissioners, for example, who are deeply interested in this matter and deeply affected by it when we come to the substance, people who have loyally supported the Government's incomes policy and who have abided by every jot and tittle of it, now find that their opportunity, through hon. Members on both sides of the House who are prepared to put forward their point of view, and that of other Churches, is inhibited and unable to be put forward because of our procedures.
I must join with my hon. Friends to protest in trenchant terms at the way in which this House is treated on legislation of this kind. I warn the Leader of the House that he stores up great trouble for himself in terms of the regard of the House by law-abiding people outside it if he continues with procedures of this nature.

4.33 p.m.

Mr. J. W. Rooker: From what has been said by the hon. Member for Wokingham (Mr. van Straubenzee), anyone would think that hon. Members have had only since the Second Reading to table amendments. That is not so. Amendments could have been tabled from the time of the publication

of the Bill. There was a motion on the Order Paper to that effect.

Hon. Members: No.

Mr. Rooker: Therefore, the hon. Gentleman's argument is not substantiated.

Mr. van Stranbenzee: Will the hon. Gentleman give way?

Mr. Rooker: No. Time is short, and I presume that hon. Members want to get on with the debate on the Bill.
It is Opposition Members who are delaying the House. The hypocrisy of the Opposition in opposing yesterday the timetable motion on the Aircraft and Shipbuilding Industries Bill has been followed by their opposition to this motion. The motion clearly gives hon. Members all day and all night, if they wish, to debate the Bill. There is no reason for the argument put to my right hon. Friend the Leader of the House about curtailing debate and bringing down a guillotine.
I am not wholly enamoured of the Bill. I may decide to abstain on one amendment. From the words of the motion, it is clear that we shall have all day and all night to debate the Bill. It is dis-honourable of Opposition Members to keep accusing the Lord President of curtailing debate, because patently that is not true.

4.35 p.m.

Mr. David Mitchell: I want to make only two very brief points. The hon. Member for Birmingham, Perry Barr (Mr. Rooker) has stated that ever since the Bill was published it has been possible to table amendments. I assure him that I sought to table amendments before the Second Reading was completed. I was advised that I was not able so to do. The position is that the House has not been sufficiently able to table amendments.
Yesterday we had an important debate in the Chamber. There was a running three-line Whip on both sides of the House. We were not able to go to our constituencies to consult various people. Therefore, we are being asked to debate a Bill on which we have not been able to consult properly the legitimate interests in our constituencies that will he affected.
Further to that, my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) talked about the reduced time for discussion. There is another matter of which the House ought to be aware. That is the strange form of the Money Resolution, which actually prevents us from discussing in Committee many matters which we wish to discuss. They include whether the breach of the Beveridge principle is something that the House ought to accept.
I want to add my voice of protest about the way in which the House is being treated in this matter.

4.36 p.m.

Mr. Ian Gow: The National Insurance Surcharge Bill was published on the last day of November. It received its Second Reading on Monday, and that by a majority of two votes only. The business motion before us requires that we should complete all the remaining stages of the Bill in the House today.
The first point that I wish to raise is one that we raised in the House yesterday when dealing with the Bill to nationalise the aircraft and shipbuilding industries. Yesterday there was also a motion which in effect restricted the timetable allowed to the House to debate a Bill of crucial importance. Yesterday, as today, the motion in the name of the Leader of the House was not moved by the Leader of the House. Indeed, we are invited to agree to this motion without any justification being given to the House for our abandoning what in the motion is described as the "practice of the House".
I submit to you, Mr. Deputy Speaker, that what is at stake here is not the practice of the House, as the motion would have us believe. What we are discussing is a rule of the House. In support of that contention, perhaps I may refer you, Mr. Deputy Speaker, to the great book, "Erskine May", and to page 702, Rule 4. I underline the word "rule" because here it is stated not as a practice of the house but as a rule of the House, as follows:
Not more than one stage of a bill founded upon a charging resolution can be taken on the same day.
The heading to that passage is not "practice" but "Rule".
Perhaps you would move on, Mr. Deputy Speaker, to page 709, where you will find the following words:
Since the rule that not more than one stage of a financial bill shall be taken on the same day applies only to bills which are brought in on a charging resolution, it applies in practice only to Consolidated Fund Bills and taxation bills.
Twice in the great book we have reference made not to a practice but to a rule.
I suggest that it is erroneous for the Leader of the House to table this business motion, which refers to "practice" when it ought to refer to "rule". If it is a rule of the House, all the more reason for the Lord President to justify in an opening speech moving the motion the reason why the Government think it right to curtail discussion in this way.
I wonder why this rule exists. The rule exists so that there can be a proper interval between the Committee stage and the Third Reading. The reason why the rule provides that there shall be this interval of time is to enable Members to discuss with their constituents important issues which come before Parliament—notably those which raise taxation.
The Lord President, who is not merely the successor of Nye Bevan at Ebbw Vale but his biographer, is saying that Members shall be denied the opportunity, of which in times past he and Nye Bevan were the champions, to consult their constituents. It lies ill, not on the lips of the Lord President because we do not see or hear his lips, but in the mind and on the pen, if it was the right hon. Gentleman or his special advisers who drafted this motion, that such a motion should have the effect of preventing hon. Members from carrying out that duty of consultation with their constituents which we were always told was at the heart of Socialism.

Mr. Peter Rost: Has my hon. Friend noticed that the Leader of the House has not even had the courtesy to listen to a single word of my hon. Friend's speech? The whole time my hon. Friend has been speaking the Leader of the House has been talking with his colleagues on the Front Bench—no doubt cooking up the next motion to be put down tomorrow.

Mr. Gow: It will not have escaped the attention of my hon. Friend that the


Leader of the House is sitting next to a fellow member of the Cabinet. On the right of the Lord President sit two Ministers from the Treasury. We all know that the Lord President is unable to direct his mind to the crucial subject of this motion, because he is far too busily engaged trying to patch up some semblance of unity in the Cabinet. We know why two Treasury Ministers are present.

Mr. Ridley: On the contrary, I believe that the Lord President is trying to persuade the Financial Secretary to accept a post in the new Ministry of dirty tricks.

Mr. Gow: If my hon. Friend is able to obtain the leave of the House, he will be able to develop that theme further.
I could understand if the Lord President had tabled a motion to take all the remaining stages of the Bill it the Bill were of scant importance. But the Bill is of major importance. It has new revenue consequences approaching £1,000 million. The Bill will have the greatest consequence for small businesses in particular. We believe that it will contribute directly to precisely that issue of unemployment, in fighting which the Lord President has said that he will expend and use up every breath in his body. If the Lord President is to be taken at his breath value, he ought to be passionately keen that there should be a reasonable interval between Committee and Third Reading so that those of us who are concerned about unemployment will have a chance to listen to our constituents, who are very anxious to explain to us the evil effects of the Bill.

Mr. George Cunningham: Why do we not get started?

Mr. Gow: Because what is crucial to this House, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said, is that we do not allow the Executive to override the rights of the House in proper debate of crucial Bills.
There are 14 amendments and one new clause on the Order Paper. It fell to you, Mr. Deputy Speaker, in your capacity as Chairman of Ways and Means, to make a selection. It would be quite

out of order to comment upon the selection which you have made. But we are entitled to point out that only three of the 14 amendments have been selected for debate and that the one new clause which has been tabled will not have sufficient time to be properly debated. When we are to consider a Bill of such importance as this it is wrong that our rights as Back-Benchers should be curtailed in this way.

Mr. George Cunningham: Will the hon. Gentleman address his mind to the thought that in virtually every other Parliament in the world—by which I mean free world—it is common practice to timetable Bills? They have the common sense, which we do not, to recognise that what matters is the vote, so long as a reasonable amount of time is given for discussion.
If it is acceptable in other countries as being perfectly in conformity with democratic practice, why is there something so terrible about limiting the debate—if the hon. Gentleman had not spoken—to five and a half or six and a half hours? Is the hon. Gentleman really telling us that he has not been consulting his constituents about this proposition for the past four and a half months? Whether or not one supports it, it is brutally simple, and consultations should have taken place on the basis of the Chancellor's statement in July.

Mr. Gow: The Bill was printed only on 30th November. It is just not possible to consult one's constituents on the basis of declarations of intent by the Government.

Mr. George Cunningham: Of course it is.

Mr. Gow: I do not know where the hon. Gentleman has been this last year. I clearly remember the Chancellor of the Exchequer telling the House that the year-on-year rate of inflation would be in single figures by December 1976. It is now December 1976 and the year-on-year rate of inflation is about 15 per cent.—50 per cent. above what the Chancellor predicted. Therefore, we cannot rely on the Government's forecasts—

Mr. George Cunningham: It was not a forecast.

Mr. Gow: —or statements by the Government about Bills which they are to introduce.
The Bill was printed on 30th November and received its Second Reading on Monday by only two votes. Now the Government are saying "Do not worry about the rules. The only thing that matters is that the Socialist juggernaut should continue."
These rules have been designed to protect the rights of people and their representatives in this House. If we want evidence of that, we should turn to the good book—it is a good book and I wish that the Lord President would read it—which states:
Not more than one stage of a Bill founded upon a charging resolution can be taken on the same day.
That rule is there to protect the rights of the people.
All this talk about the Labour Party being the party of the people now lies in decayed ribbons and in the breath of the Leader of the House. The Conservative Party is fast becoming, as it has always been, the people's party. It is Conservative Members who insist on the rights of the people. That is why we shall vote against this scandalous motion.

Mr. Cyril Smith: Mr. Cyril Smith (Rochdale) rose in his place and claimed to move, That the Question be now put, but Mr. DEPUTY SPEAKER withheld his assent and declined then to put that Question.

4.49 p.m.

Mr. Peter Hordern: I hope that you, Mr. Deputy Speaker, will consider very seriously the excellent point made by my hon. Friend the Member for Eastbourne (Mr. Gow) about the motion. If it is indeed right that according to what he calls the "good book"—I think that his definition of the good book may differ somewhat from that of my hon. Friend the Member for Wokingham (Mr. van Straubenzee)—it is a rule, not a practice, that we are talking about, I ask you to give your ruling on the subject to the House.
I do not see how we can properly proceed if this motion offends against a rule, not a practice, of the House. I think that it is a most important matter and that, if my hon. Friend the Member for Eastbourne is right, as I am sure he is,

the House should seek your guidance, Mr. Deputy Speaker.
I should like to draw the attention of the Leader of the House, whose attention has been distracted enough in the debate, to one other matter. I understand that he will need the maximum advice from the Financial Secretary and the Minister of State, Treasury, on all sorts of other matters which do not particularly pertain to this debate, but this matter is in his own province. It concerns the report produced by a Committee of the House on the Preparation of Legislation in May 1975. Both sides of the House in both Houses of Parliament accepted Recommendation No. 105, which said:
Unless there is special urgency there should always be at least:

(a) two weekends between the first publication of a Bill and the debate on second reading in the first House;
(b) fourteen days between second reading and the start of the committee stage;
(c) on all Bills of considerable length or complexity, 14 days between publication of the Bill as amended in committee and the start of the report stage."

Those recommendations were accepted in principle by both sides of the House and were debated.
What gives this matter its special urgency? The proposal was put forward by the Chancellor on 22nd July. There has been plenty of time to produce a Bill before now to carry out consultation processes which appear in this recommendation and which were accepted by the Government in principle at that time. So why has the Leader of the House brought the Bill forward so late?

Mr. Rost: Does my hon. Friend think that the Leader of the House is devious enough to want to push the Bill through all its stages before the Christmas Recess, knowing that two of the Government's own Lobby fodder are likely to be doing a bunk for Europe and that as a result of the by-elections they may lose two votes?

Mr. Hordern: Of course my hon. Friend is right. I do not know what informs the thinking of the Leader of the House on this matter, but it is certainly not unconnected, I would guess, with the visit of the representatives of the International Monetary Fund. He has been told by the Chancellor that he must get this thing through willy-nilly before the


measures are announced next week. He must be able to produce them as a concrete expression of what the Government will do. This is the first tranche of the cuts, the first increase in taxation.
But we argue that this matter should have been presented to the House many weeks ago in a proper form which could have been discussed. No doubt the hon. Member for Islington, South and Finsbury (Mr. Cunningham) has had time to consult his constituents on that matter and I know that he feels strongly about the provisions of the Bill, but we should have had time to consider it after publication and then to produce proper amendments. No such time has been allowed.
This is not the first time that this has happened. The motion follows a similar one yesterday. What is happening to consideration of the Report of the Committee on the Preparation of Legislation? Why should distinguished right hon. and hon. Members give up their time to produce a report which is agreed on both sides of the House if it is to be treated with such total disrespect by the Leader of the House? This is a shameful episode and it is the second in two days.
I would ask you, Mr. Deputy Speaker, to rule on the point raised by my hon. Friend the Member for Eastbourne.

4.54 p.m.

Mr. Patrick Mayhew: It is a curious and eloquent comment on this debate so far that the Leader of the House has been supported by only one of his hon. Friends, and he took a point so bad that it succeeded in embarrasing even the Leader of the House. It was shot out of the water.
It has become almost trite to comment on the contrast between the record of the Leader of the House in his present high office and the reputation that he made as a parliamentarian before some mantle or other of office settled upon his shoulders. But although it may be trite, it is none the less essential to make that comment at every conceivable opportunity.
I was grateful to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) for listing, example by shameful example, the instances in which the right hon. Gentleman has treated this House with contempt in recent months,

by railroading measures through it without the semblance of sufficient time for consideration. Time after time I have sat here in my lowly position—if that is an apt description of so high a Bench—and watched him chattering with his coterie of friends and collaborators, shaking his head, huffing and puffing, grimacing and seeking to pass off as irrelevant non-senses the complaints, made in the interests of Parliament, that he, in the exercise of his job, is not being Leader of the House at all but Leader of only half the House.
Time and again, we have heard the excuse, "But this is in our manifesto". But where does one find in this famous manifesto, whose most detailed provisions, even those in the smallest of type, are held to be graven on the hearts of the electorate, the promise to extort £1,000 million in taxation—which is what this is—with only two days' consideration? After the Bill's publication, only two days have been allotted for the entire process in the House of Commons.
The Government, under the right hon. Gentleman's leadership—that is all he does lead, the Government and not the House—seem to have elevated the principle that ignorance of the law is no excuse, into a principle that ignorance of the law that the Government propose to make is no excuse. They say that we have known since the end of July that they proposed to raise £1,000 million in this way. But the Bill by which they set about it was not published until 30th November.
Is it any surprise that large numbers of people adversely affected by the Bill—small business men, clergymen and many others—are only now beginning to grasp what this means? We may wish that our clergymen and our archbishops were rather more worldly—I for one am glad that they are not—but is it surprising that the Archbishop of Canterbury sought to see the Prime Minister about this measure only the other day? The only surprising thing is that the Prime Minister so gracelessly refused his request.
This is yet another example of Parliament being treated with the contempt of which so many of my hon. Friends have spoken. The sad truth is that the Leader of the House has not been able to detach himself from the partisan enthusiasms


which have inflamed his entire parliamentary career. One day, however, he will no longer hold that position. and the time will come when the epitaph for his tenure has to be written.
Although, I must admit, the right hon. Gentleman does not immediately put me in mind of Omar Khayyam, although I fervently hope that he will shorty be paying a visit to the wilderness, a suitable epitaph can be taken from the Rubaiyat, at any rate as translated by Edward Fitzgerald:
Indeed, the idols I have loved so long
Have caused my credit in the eyes of men much wrong,
Have drowned my Honour in a Shallow Cup,
And sold my Reputation for a Song.

4.58 p.m.

Mr. Ian Stewart: Mr. Deputy Speaker, when you consider the most important point made by my hon. Friend the Member for Eastbourne (Mr. Gow) and his comments about the way in which consideration of the Bill has been telescoped, I hope that you will take into account and the House will remember the reason which has been given from the Treasury Bench for the necessity for a timetable in this way.
The reason was given to me on Monday evening when I asked the Minister of State, Treasury, why it was not possible, since a Bill of this kind could be steamrollered through in a week from the beginning to end, to defer consideration until the proper time had been allowed for consultations to take place with the charities, the Archbishop of Canterbury, and anyone else who might be involved. His answer was that it was necessary to get the tables printed in good time for next April.
I am sure that my hon. Friends will welcome the sympathy shown for hard-pressed businesses in the effort to have these pieces of paper in their possession well in time.

Mr. Deputy Speaker (Mr. Oscar Murton): I am very sorry to interrupt the hon. Gentleman, but the hon. Member for Horsham and Crawley (Mr. Hordern) made an inquiry of the Chair with regard to the motion. Perhaps I should have replied earlier. I was not aware that he expected an immediate

reply at that time, but perhaps I should have given it. The motion is absolutely in order.

Mr. Stewart: It may therefore be all the more important for the House to realise the specious, or at least the trivial, reason which has been given for the telescoping of the various stages of the Bill.
Is it that the Japanese pocket calculators in the Treasury are not capable of doing the necessary arithmetic quickly enough? Is it that the printing presses available to the Government are so inert that they cannot run off the new tables in time for an impost to be made by Parliament? I leave hon. Members to judge for themselves whether that is a satisfactory reason for taking advantage of the House.
The breath from the body of the Leader of the House has caused us more than enough trouble by this type of motion and I hope that we shall not have any more of this parliamentary halitosis.

Mr. Hordern: On a point of order, Mr. Deputy Speaker. After your ruling is it not clear that the motion seeks to overturn not a practice of the House but a rule of the House? Is that not a plain consequence of your ruling?

Mr. Deputy Speaker: That is correct.

5.1 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): I shall reply to some of the comments, most of which were repeats of comments made in greater detail on Monday about the time taken between the various stages of the Bill.

Mr. David Howell: On a point of order, Mr. Deputy Speaker. I am glad that the Financial Secretary is replying to the debate, but does that mean that the Leader of the House has just pushed off? Is there any reason for his leaving the Chamber after comments have been made about his personal behaviour?

Mr. Sheldon: I offer the House my right hon. Friend's apologies. He has an important meeting which he must attend. He heard most of the debate.

Mr. Eric S. Hefter: On a point of order, Mr. Deputy Speaker. Are we to have constant attacks by the


Opposition on my right hon. Friend the Leader of the House? Everybody is aware that the one person who has always listened to all the debates, as a Minister and from the Back Benches, is the Leader of the House. I have been here for 12 years and that has always been the case. Is it not scandalous that such statements can be made about my right hon. Friend purely for cheap, false propaganda.

Mr. Deputy Speaker: That is not a point of order.

Mr. Hordern: Further to that point of order, Mr. Deputy Speaker— —

Mr. Deputy Speaker: I ruled that the comment made by the hon. Member for Liverpool, Walton (Mr. Heifer) was not a point of order.

Mr. Hordern: On a different point of order. Is it not the practice and courtesy of the House that a Minister who is here to reply to a debate normally informs the Opposition if he is not able to do so? Is not this a matter that is peculiarly for him and not for the Financial Secretary?

Mr. Deputy Speaker: That is not a point of order.

Mr. Sheldon: My right hon. Friend the Leader of the House hoped that the debate would not be so lengthy. I concur with my hon. Friend the Member for Liverpool, Walton (Mr. Heifer). The Opposition may criticise—and they are entitled to criticise particular measures brought before the House by the Leader of the House for consideration—but it is more difficult to criticise him for his lack of attendance. He has been a most assiduous attender of the House both when I have had the privilege of working with him and when I was on the Opposition Benches.
The hon. Member for Guildford (Mr. Howell) repeated comments made during earlier debates, both on the Ways and Means Resolution on Tuesday last week and during the Second Reading debate on Monday this week. I take note of his comments. I understand the desire of hon. Members for a longer period for is-cussion of and consultation about any Bill. Unfortunately, as I indicated on both previous occasions, it was not possible to allow the length of time that one would normally wish.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) criticised us for allowing so little time. He said that the Bill came out only on Thursday and was introduced on Monday. But I must remind the hon. Gentleman and his hon. Friend the Member for Eastbourne (Mr. Gow) that the main outlines of the measure were known in July. As my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) said, the proposition is basically simple—that the employer's contribution should be increased by 2 per cent.
The issue was debated in August and representations have been made since then. The principle has been around for a long time, and that is as it should be. I understand that knowledge of the precise form of the tax brings about a fresh examination, and one wishes to see that. But, for reasons that I shall explain, there was a shortage of time and a need to produce the measure in the time now being made available.

Mr. Gow: If the principles behind the Bill were known to the Government in July, why was the Bill not printed until 30th November?

Mr. Sheldon: The Session did not begin until a week or two ago. The Bill had to be brought in in this Session.
The hon. Member for Cirencester and Tewkesbury put down amendments last week and that effectively disposes of the argument of the hon. Member for Basingstoke (Mr. Mitchell), who said that there had been less time than that for tabling amendments. As a result of the procedural motion tabled by the Lord President, amendments were allowed in advance of Second Reading. Hon. Members took advantage of that, including the hon. Member for Cirencester and Tewkesbury, who tabled several amendments last week.
The need for urgency arises from our desire to recognise the needs of those hard-pressed businesses which the hon. Member for Hitchin (Mr. Stewart) suggested were being ignored. I disagree with him. We need to produce the administrative arrangements in such a manner as to avoid inconvenience to employers, precisely because we do not want to increase the burden on businesses. We want to have the administrative changes and tables ready at the most


suitable time for them. The most suitable arrangement was to pursue the normal programme for administrative changes as they apply to ordinary national insurance contributions. We are endeavouring to meet that timetable but it was made more difficult by the late opening of the Session. That led to a greater compression than might otherwise been the case.
My right hon. Friend the Leader of the House suggested that the Committee stage might be taken next week during the interval between various stages of the devolution debate. For one reason or another that was not convenient to the Opposition. I make no comment on that. There are many factors that need to be considered and I understand that. We have tried to be as accommodating as possible. There was the possibility of taking the debate tomorrow, which would give only an extra day. I mention those two matters only as an earnest of our attempt to be as accommodating as the shortage of time permitted.
The opportunities for debate are still considerable. The hon. Member for Eastbourne said that the selection of amendments was unduly restrictive. I do not agree, but that is not a matter

for me. It is a matter for the Chair, and I do not in any way seek to criticise the Chair. We have some useful amendments for discussion, and the sooner we get down to it the sooner shall we make progress in the interests of all concerned.

5.12p.m.

Mr. David Howell: By leave of the House Mr. Deputy Speaker, that seems to be the end of this rule-bending exercise—a very grubby business it is.
When the House goes into Committee we shall be discussing the restrictive nature of the Ways and Means Resolution and its effect in cutting out of the debate a great many interests of the many hard-working and dedicated people who have been slapped in the face by this measure. In the meantime we should perhaps stick to discussing the motion, which proposes that the rule should be overthrown—as you confirmed, Mr. Deputy Speaker—in the interests of something which is still not clear to us. We are entitled to our suspicions, and in the light of that I advise my hon. Friends to press the matter to a vote.

Question put: —

The House divided: Ayes 256, Noes 240.

Division No. 17.]
AYES
[5.12 p.m.


Abse, Leo
Clemitson, Ivor
English, Michael


Allaun, Frank
Cocks, Rt Hon Michael
Ennals, David


Anderson, Donald
Cohen, Stanley
Evans, Fred (Caerphilly)


Archer, Peter
Coleman, Donald
Evans, loan (Aberdare)


Armstrong, Ernest
Colquhoun, Ms Maureen
Ewlng, Harry (Stirling)


Ashley, Jack
Conlan, Bernard
Faulds, Andrew


Ashton, Joe
Cook, Robin F. (Edln C)
Fernyhough, Rt Hon E.


Atkins, Ronald (Preston N)
Corbett, Robin
Fitch, Alan (Wigan)


Atkinson, Norman
Cowans, Harry
Flannery, Martin


Bagier, Gordon A. T.
Cox, Thomas (Tooting)
Fletcher, L. R. (Ilkeston)


Barnett, Guy (Greenwich)
Craigen, Jim (Maryhill)
Fletcher, Ted (Darlington)


Barnett, Rt Hon Joel (Heywood)
Crawshaw, Richard
Foot, Rt Hon Michael


Bates, Alf
Cronin, John
Ford, Ben


Benn, Rt Hon Anthony Wedgwood
Crowther, Stan (Rotherham)
Forrester, John


Bennett, Andrew(Stockport N)
Cryer, Bob
Fowler, Gerald (The Wrekin)


Bidwell, Sydney
Cunningham, G. (Islington S)
Freeson, Reginald


Bishop, E. S.
Davidson, Arthur
Garrett, John (Norwich S)


Blenkinsop, Arthur
Davies, Bryan (Enfield N)
Garrett, W. E. (Wallsend)


Boardman, H.
Davies, Denzil (Llanelli)
George, Bruce


Bottomley, Rt Hon Arthur
Davies, Ifor (Gower)
Gilbert, Dr John


Boyden, James (Bish Auck)
Davis, Clinton (Hackney C)
Ginsburg, David


Bradley, Tom
Deakins, Eric
Golding, John


Bray, Dr Jeremy
Dean, Joseph (Leeds West)
Gould, Bryan


Brown, Hugh D. (Provan)
Dell, Rt Hon Edmund
Gourlay, Harry


Buchan, Norman
Dempsey, James
Graham, Ted


Buchanan, Richard
Doig, Peter
Grant, George (Morpeth)


Butler, Mrs Joyce (Wood Green)
Dormand, J. D.
Grocott, Bruce


Callaghan, Jim (Middleton &amp; P)
Douglas-Mann, Bruce
Hardy, Peter


Campbell, Ian
Duffy, A. E. P.
Harper, Joseph


Canavan, Dennis
Dunn, James A.
Harrison, Walter (Wakefield)


Cant, R. B.
Dunnett, Jack
Hattersley, Rt Hon Roy


Carmichael, Neil
Eadie, Alex
Hatton, Frank


Carter, Ray
Edge, Geoff
Healey, Rt Hon Denis


Cartwright, John
Edwards, Robert (Wolv SE)
Heffer, Eric S.


Castle, Rt Hon Barbara
Ellis, John (Brigg &amp; Scun)
Hooley, Frank




Horam, John
Marquand, David
Sillars, James


Hoyle, Doug (Nelson)
Marshall, Dr Edmund (Goole)
Silverman, Julius


Huckfield, Les
Marshall, Jim (Leicester S)
Skinner, Dennis


Hughes, Rt Hon C. (Anglesey)
Mason, Rt Hon Roy
Small, William


Hughes, Robert (Aberdeen N)
Maynard, Miss Joan
Smith, John (N Lanarkshire)


Hughes, Roy (Newport)
Meacher, Michael
Snape, Peter


Irvine, Rt Hon Sir A. (Edge Hill)
Mikardo, Ian
Spearing, Nigel


Irving, Rt Hon S. (Dartford)
Millan, Rt Hon Bruce
Spriggs, Leslie


Jackson, Colin (Brighouse)
Miller, Dr M. S. (E Kilbride)
Stallard, A. W.


Janner, Greville
Miller, Mrs Millie (Ilford N)
Stewart, Rt Hon M. (Fulham)


Jay, Rt Hon Douglas
Morris, Charles R. (Openshaw)
Stott, Roger


Jeger, Mrs Lena
Morris, Rt Hon J. (Aberavon)
Strang, Gavin


Jenkins, Hugh (Putney)
Moyle, Roland
Strauss, Rt Hon G. R.


John, Brynmor
Murray, Rt Hon Ronald King
Summerskill, Hon Dr Shirley


Johnson, James (Hull West)
Newens, Stanley
Taylor, Mrs Ann (Bolton W)


Johnson, Walter (Derby S)
Noble, Mike
Thomas, Mike (Newcastle E)


Jones, Alec (Rhondda)
Oakes, Gordon
Thomas, Ron (Bristol NW)


Jones, Barry (East Flint)
Ogden, Eric
Thorne, Stan (Preston South)


Jones, Dan (Burnley)
O'Halloran, Michael
Tierney, Sydney


Judd, Frank
Orme, Rt Hon Stanley
Tinn, James


Kaufman, Gerald
Ovenden, John
Tomlinson, John


Kelley, Richard
Padley, Walter
Torney, Tom


Kilroy-Silk, Robert
Palmer, Arthur
Tuck, Raphael


Kinnock, Neil
Park, George
Urwin, T. W.


Lambie, David
Parry, Robert
Varley, Rt Hon Eric G.


Lamborn, Harry
Pendry, Tom
Walden, Brian (B'ham L'dyw'd;


Lamond, James
Perry, Ernest
Walker, Harold (Doncaster)


Latham, Arthur (Paddington)
Phipps, Dr Colin
Walker, Terry (Kingswood)


Leadbitter, Ted
Prentice, Rt Hon Reg
Ward, Michael


Leo, John
price, C. (Lewisham W)
Watkins, David


Lestor, Miss Joan (Eton &amp; Slough)
Price, William (Rugby)
Watkinson, John


Lever, Rt Hon Harold
Rees, Rt Hon Merlyn (Leeds S)
Weetch, Ken


Lewis, Ron (Carlisle)
Roberts, Albert (Normanton)
Weitzman, David


Lipton, Marcus
Roberts, Gwilym (Cannock)
Wellbeloved, James


Litterick, Tom
Robinson, Geoffrey
White, Frank R. (Bury)


Loyden, Eddie
Roderick, Caerwyn
Whitlock, William


Luard, Evan
Rodgers, George (Chorley)
Willey, Rt Hon Frederick


Lyon, Alexander (York)
Rodgers, Rt Hon William (Stockton)
Williams, Alan (Swansea W)


Mabon, Dr J. Dickson
Rooker, J. W.
Williams, Alan Lee (Hornch'ch)


McCartney, Hugh
Rose, Paul B.
Williams, Sir Thomas (Warrington)


McDonald, Or Oonagh
Ross, Rt Hon W. (Kilmarnock)
Wilson, Alexander (Hamilton)


McElhone, Frank
Rowlands, Ted
Wilson, Rt Hon Sir Harold (Huyton)


MacFarquhar, Roderick
Ryman, John
Wilson, William (Coventry SE)


McGuire, Michael (Ince)
Sandelson, Neville
Wise, Mrs Audrey


MacKenzie, Gregor
Sedgemore, Brian
Woodall, Alec


Mackintosh, John P.
Selby, Harry
Woof, Robert


Maclennan, Robert
Shaw, Arnold (Ilford south)
Young, David (Bolton E)


McMillan, Tom (Glasgow C)
Sheldon, Robert (Ashton-u-Lyne)



Madden, Max
Shore, Rt Hon Peter
TELLERS FOR THE AYES:


Magee, Bryan
Short, Mrs Renée (Wolv NE)
Mr. James Hamilton and


Mallalieu, J. P. W.
Silkin, Rt Hon John (Deptford)
Mr. David Stoddart


Marks, Kenneth
Silkin, Rt Hon S. C. (Dulwich)





NOES


Adley, Robert
Churchill, W. S.
Fletcher-Cooke, Charles


Alison, Michael
Clark, Alan (Plymouth, Sutton)
Fookes, Miss Janet


Amery, Rt Hon Julian
Clerk, William (Croydon S)
Forman, Nigel


Arnold, Tom
Clegg, Walter
Fowler, Norman (Sutton C'f' d)


Atkins, Rt Hon H. (Spelthorne)
Cope, John
Fox, Marcus


Bain, Mrs Margaret
Cordle, John H.
Freud, Clement


Baker, Kenneth
Cormack, Patrick
Fry, Peter


Banks, Robert
Costain, A. P.
Galbraith, Hon T. G. D.


Beith, A. J.
Craig, Rt Hon W. (Belfast E)
Gardiner, George (Reigate)


Bell, Ronald
Crawford, Douglas
Gardner, Edward (S Fylde)


Bennett, Dr Reginald (Fareham)
Crouch, David
Gilmour, Rt Hon Ian (Chesham)


Benyon, W.
Dean, Paul (N Somerset)
Gilmour, Sir John (East Fife)


Berry, Hon Anthony
Dodsworth, Geoffrey
Glyn, Dr Alan


Biffen, John
Douglas-Hamilton, Lord James
Godber, Rt Hon Joseph


Biggs-Davison, John
Drayson, Burnaby
Goodhew, Victor


Blaker, Peter
du Cann, Rt Hon Edward
Goodlad, Alastair


Boscawen, Hon Robert
Dunlop, John
Gorst, John


Bottomley, Peter
Durant, Tony
Gow, Ian (Eastbourne)


Bowden, A. (Brighton, Kemptown)
Eden, Rt Hon Sir John
Gower, Sir Raymond (Barry)


Boyson, Dr Rhodes (Brent)
Edwards, Nicholas (Pembroke)
Grant, Anthony (Harrow C)


Braine, Sir Bernard
Elliott, Sir William
Gray, Hamish


Brittan, Leon
Emery, Peter
Griffiths, Eldon


Brotherton, Michael
Ewing, Mrs Winifred (Moray)
Grimond, Rt Hon J.


Brown, Sir Edward (Bath)
Eyre, Reginald
Grist, Ian


Bryan, Sir Paul
Fairbairn, Nicholas
Grylls, Michael


Buchanan-Smith, Alick
Fairgrieve, Russell
Hall-Davis, A. G. F.


Budgen, Nick
Farr, John
Hamilton, Michael (Salisbury)


Bulmer, Esmond
Fell, Anthony
Hampson, Dr Keith


Butler, Adam (Bosworth)
Finsberg, Geoffrey
Hannam, John


Chalker, Mrs Lynda
Fisher, Sir Nigel
Harvie Anderson, Rt Hon Miss







Hastings, Stephen
Mates, Michael
Shersby, Michael


Havers, Sir Michael
Maude, Angus
Silvester, Fred


Hayhoe, Barney
Mawby, Ray
Sims, Roger


Heath, Rt Hon Edward
Maxwell-Hyslop, Robin
Skeet, T. H. H.


Henderson, Douglas
Mayhew, Patrick
Smith, Cyril (Rochdale)


Hicks, Robert
Miller, Hal (Bromsgrove)
Smith, Dudley (Warwick)


Hodgson. Robin
Mills, Peter
Speed, Keith


Holland, Philip
Miscampbell, Norman
Spence, John


Hooson, Emlyn
Mitchell, David (Basingstoke)
Spicer, Michael (S Worcester)


Hordern, Peter
Moate, Roger
Sproat, Iain


Howe, Rt Hon Sir Geoffrey
Monro, Hector
Stainton, Keith


Howell, David (Guildford)
Montgomery, Fergus
Stanbrook, Ivor


Howells, Geraint (Cardigan)
More, Jasper (Ludlow)
Stanley, John


Hunt, David (Wirral)
Morgan-Giles, Rear-Admiral
Steel, David (Roxburgh)


Hurd, Douglas
Morris, Michael (Northampton S)
Steen, Anthony (Wavertree)


Hutchison, Michael Clark
Mudd, David
Stewart, Donald (Western Isles)


James, David
Neave, Airey
Stewart, Ian (Hitchin)


James, R. Rhodes (Cambridge)
Nelson, Anthony
Stokes, John


Jenkin, Rt Hon P. (Wanst'd &amp; W'df' d)
Neubert, Michael
Stradling Thomas, J.


Jessel, Toby
Nott, John
Tapsell, Peter


Johnson Smith, G. (E Grinstead)
Onslow, Cranley
Taylor, R. (Croydon NW)


Johnston, Russell (Inverness)
Oppenheim, Mrs Sally
Taylor, Teddy (Cathcart)


Jones, Arthur (Daventry)
Page, John (Harrow West)
Tebbit, Norman


Jopling, Michael
Page, Rt Hon R. Graham (Crosby)
Thatcher, Rt Hon Margaret


Joseph, Rt Hon Sir Keith
Page, Richard (Workington)
Thomas, Dafydd (Merioneth)


Kershaw, Anthony
Parkinson, Cecil
Thomas, Rt Hon P. (Hendon S)


Kilfedder, James
Pattie, Geoffrey
Thompson, George


Kimball, Marcus
Penhaligon, David
Townsend, Cyril D


King, Tom (Bridgwater)
Percival, Ian
Trotter, Neville


Kitson, Sir Timothy
Price, David (Eastleigh)
van Straubenzee, W. R.


Knight, Mrs Jill
Pym, Rt Hon Francis
Viggers, Peter


Knox, David
Raison, Timothy
Wainwright, Richard (Colne V)


Lamont, Norman
Rathbone, Tim
Wakeham, John


Langford-Holt, Sir John
Rees, Peter (Dover &amp; Deal)
Walder, David (Clitheroe)


Latham, Michael (Melton)
Rees-Davies, W. R.
Wall, Patrick


Lawrence, Ivan
Reid, George
Walters, Dennis


Lawson, Nigel
Renton, Rt Hon Sir D. (Hunts)
Warren, Kenneth


Le Marchant, Spencer
Renton, Tim (Mid-Sussex)
Watt, Hamish


Lester, Jim (Beeston)
Ridley, Hon Nicholas
Weatherill, Bernard


Lewis, Kenneth (Rutland)
Rifkind, Malcolm
Wells, John


Lloyd, Ian
Roberts, Michael (Cardiff NW)
Welsh, Andrew


Loveridge, John
Roberts, Wyn (Conway)
Whitelaw, Rt Hon William


Luce, Richard
Rodgers, Sir John (Sevenoaks)
Wiggin, Jerry


McAdden, Sir Stephen
Ross, Stephen (Isle of Wight)
Wilson, Gordon (Dundee E)


MacCormick, Iain
Ross, William (Londonderry)
Winterton, Nicholas


McCrindle, Robert
Rossi, Hugh (Hornsey)
Young, Sir G. (Ealing, Acton)


Macfarlane, Neil
Rost, Peter (SE Derbyshire)
Younger, Hon George


MacGregor, John
Sainsbury, Tim



Macmillan, Rt Hon M. (Farnham)
St. John-Stevas, Norman
TELLERS FOR THE NOES


Madel, David
Shelton, William (Streatham)
Mr John Corrie and


Marshall, Michael (Arundel)
Shepherd, Colin
Mr. Peter Morrison


Marten, Neil

Question accordingly agreed to.

Ordered,
That, notwithstanding the practice of the House relating to the interval between the various stages of Bills of aids and supplies, more than one stage of the National Insurance Surcharge Bill may be proceeded with at this day's sitting.

NORTHERN IRELAND COMMITTEE

Ordered,
That the matter of the proposal for a draft Transport (Northern Ireland) Order 1976 and other road and rail transport matters in Northern Ireland be referred to the Northern Ireland Committee.—[Mr. Frank R. White.]

Orders of the Day — NATIONAL INSURANCE SURCHARGE BILL

Considered in Committee.

[Mr. OSCAR MURTON in the Chair]

Clause 1

SURCHARGE ON SECONDARY CLASS 1 CONTRIBUTIONS

5.28 p.m.

The Chairman: The first amendment selected is No. 4, in page 1, line 16, leave out '2' and insert '1'.

Mr. David Howell: on a point of order, Mr. Murton. Now that we are in Committee I raise a matter that arises from the schedule of amendments that we shall discuss. I am not in any way questioning the selection of amendments although I think you will agree, Mr. Murton, that amendments are somewhat sparse on the selection list. I think you will realise, Mr. Murton, that that appears to arise primarily from the way in which the Ways and Means Resolution has been drafted. It has been drafted effectively to exclude any amendment that might allow particular classes or groups to be exempt from the payroll tax—namely, the 2 per cent. increase.
The effect of that exclusion is at a stroke, if I may use the expression, to remove from debate all opportunity to discuss the position of the Churches and charities, which will be acutely affected by the Bill. In the past few days they have been making known their anger and dismay as it has become apparent that under the procedures of the House there will be no protection for them.
The House would value your guidance, Mr. Murton, whether there is any protection from this sort of device. The effects are very serious. We are dealing with the whole range of leading charities, all of which will be affected by having to find a large increase in funds to pay their employees.
During the Second Reading debate I read out some of the sums of money that will now have to be found by organisations such as Dr. Barnardo's Homes, the

Spastics Society and others. The Minister of State then said that the figures were "wildly out". Naturally, I have double-checked the figures since then, and the Minister of State was wrong. They are not wildly out. They are precisely right. This is the only opportunity I shall have, Mr. Murton, to ask the Minister through you to withdraw the charge that the figures were wildly out. He must do so.
The Minister said that to his hon. Friend the Member for Kingswood (Mr. Walker):
did not attempt to use figures from newspapers, which seem to be wildly out, at least as far as we can tell".—[Official Report, 6th December 1976; Vol. 922, c. 147.]
But the figures were not wildly out. They were exactly right. We must, therefore, have a withdrawal on that point before we can proceed with the debate.
An important matter of principle is involved. If Treasury Ministers are to cone to the Dispatch Box, with no knowledge of the correct figures and use phrases such as "wildly out" when the figures are in fact correct, this is very worrying to all of us. Treasury Ministers who have not the slightest clue as to the impact of their measures are prepared to condemn the precise estimates provided by the National Council of Social Service and by the charities themselves and to dismiss them as "wildly out" when they are not. We must have some reassurance that the Treasury Ministers know what they are about and know vaguely what figures are involved. I look forward to a withdrawal by the Minister of State of that charge. We must have that from him.
The precise figure that led the Minister of State to that unwise and rather loose condemnation was the one concerning Dr. Barnardo's. One Labour Member, in a slightly irresponsible interjection, said that £5 million was far too large a total wage bill for a charity. It turns out that the total salary bill of Dr. Barnardo's for 1975–76 is £5,400,000 on an average number of employees of 2,470. For 1976–77, when the measure will apply, the salary bill will exceed £6 million.
The figures, therefore, were accurate. If anything they underestimated the position. The Royal National Institute for the Blind will have to go out and raise an extra £50.000. The Spastics Society


will have to go out and raise an extra £93,000.
Then there is the position of the Churches, in regard to which the measure is estimated to cost, in the case of the—

The Chairman: I am willing at the appropriate moment to reply to the hon. Gentleman's point of order, but I must point out that the comments he is making now are not related to subjects which are a matter for the Chair.

Mr. Howell: I accept your ruling, Mr. Murton. I was reacting to a situation in which these matters can be raised at no other point than at the beginning of the debate, and yet they are matters of burning importance and intensity. But you rightly called me to order, and I leave these matters by asking whether we can in any way be safeguarded in the future against devices which prevent this House from debating measures which are a slap in the face for the work of charities, which undermine their efforts, and which force them, as Christmas comes, to face the prospect of raising far more money than they could ever have envisaged, as a result of a measure which will do them great damage.

Dr. Oonagh McDonald: On a point of order, Mr. Murton. It relates to the provisional selection of amendments. Together with some of my hon. Friends, I submitted an amendment concerned with the impact of the National Insurance Surcharge Bill on local authorities and on the non-manufacturing public sector. This amendment has not been selected. Instead, a trivial amendment such as No. 11 has been selected in preference to my own amendment which is on a substantial matter. I therefore appeal to you, even at this late stage—

The Chairman: Order. I point out to the hon. Lady—I am sure that she meant no offence—that she must not comment upon the selection of amendments, arguing whether some may be trivial or not. It is entirely a matter for the Chair. Perhaps I may now answer both points of order.

Mr. David Mitchell: On a point of order, Mr. Murton. Will you guide me whether a series of amendments

such as that put down by the hon. Member for Thurrock (Dr. McDonald) and a number of others, including. Amendment No. 8, have been ruled out of order because of the terms of the Ways and Means Resolution which was slipped through? Is it this resolution which has barred you, Mr. Murton, from being able to allow these amendments to be discussed?

The Chairman: Perhaps the hon. Member for Basingstoke (Mr. Mitchell) will allow me to answer the points of order.
I am obliged to the hon. Member for Guildford (Mr. Howell) for giving me prior notice that he intended to raise the original point of order. The Bill is founded upon a Ways and Means Resolution, to which the House agreed on 30th November, and the rules of the House prevent the Chair from calling any amendments which would take the Bill outside the terms of that resolution.
The resolution clearly provides that the surcharge shall be imposed on every person who pays secondary Class 1 contributions, that is, on all employers. It follows that no amendment is in order which permits exceptions, either temporary or permanent, or which imposes the charge on anyone other than an employer. The resolution also provides that the surcharge must be paid into the Consolidated Fund.
In addition, any expenditure provided for in the Bill must fall within the terms of the Money Resolution, to which the House agreed last Monday. This resolution provides only for administrative expenses, and it follows that any amendment providing for expenditure, whether out of moneys provided by Parliament or the Consolidated Fund, which goes beyond mere administration, is also out of order.
It is on these various grounds that I must regretfully rule that the majority of the amendments of which notice has been given are not in order. With regard to the point of order raised by the hon. Member for Thurrock (Dr. McDonald) it is clearly shown on page 755 of "Erskine May" that if a payment out of the Consolidated Fund is envisaged, a specific provision in the Money Resolution is needed. There is in this case no such provision.

Mr. George Cunningham: On a point of order, Mr. Murton. I am sorry that I missed some of the earlier presentations of points of order, but I should be grateful for your assistance. The Ways and Means Resolution, besides making quite definite and clear the points to which you have just referred in your ruling, also says that the surcharge will be one which is
equal in every case to 2 per cent. of the amount of the earnings".
How is it that, with those words appearing in the Ways and Means Resolution, an amendment which specifies that for 2 per cent. there shall be substituted 1 per cent. is in order, but amendments which would exempt some people from the impost are not in order? Both seem to me detractions from what is clearly stated in the Money Resolution. How can one escape and another not?

The Chairman: Perhaps I can answer the hon. Gentleman by saying that in a Money Resolution the maximum amount which may be required is always specified, although it is in order for a lesser amount to be introduced by an amendment.

Mr. George Cunningham: Further to the point of order, Mr. Murton. My recollection is that in Money Resolutions and Ways and Means Resolutions words are frequently used which say that a charge shall be introduced not larger than X per cent. or £X, or whatever it might be. This Ways and Means Resolution does not do that. It says quite definitely that the charge will be
equal in every case to 2 per cent. of the amount of the earnings".
If the amendment in relation to 1 per cent. is in order, I cannot see how it is out of order for us to consider other detriments, although in a different form, exempting some people from the 2 per cent. rather than changing the figure of 2 per cent.

The Chairman: I am informed that in the resolution it is not practicable to state various rates for different types of case.

Mr. George Cunningham: With great respect, Mr. Murton—we must abide by your ruling, whatever it is—but l do not understand the ruling, because there is no intention of having different rates for different people. The Government's suggestion

is clear—namely, that the surcharge rate will be 2 per cent. in all cases. But the first amendment which we are to debate seeks to substitute 1 per cent. for 2 per cent. in all cases. That is a departure from the Ways and Means Resolution. There are other proposals which seek to depart from that resolution or to modify the words "in every case".

The Chairman: Perhaps I could explain that it is in order to accept an amendment which reduces the amount "in every case" and it is in order for such an amendment to be debated.

Mr. George Cunningham: Would you say that again, Mr. Murton?

The Chairman: Amendment No. 4, to which the hon. Gentleman is referring, seeks to reduce the amount from 2 per cent. to 1 per cent. It would be in order to debate that amendment because, provided that the figure referred to the words "in every case", it would be in order for that to be debated.

Mr. George Cunningham: The relevant two lines in the Ways and Means Resolution are
equal in every case to 2 per cent. of the amount …".
It seems to me that there are two parts of that language that different people want to amend. One relates to the words "in every case". Another relates to the figure of 2 per cent. Why is one allowed to amend 2 per cent. but not the words "in every case"? Surely neither has a greater magical quality as being fundamental to the Ways and Means Resolution than the other.

The Chairman: I can only reiterate what I said—namely, that it would be in order for the Committee to debate a reduction from 2 per cent. to 1 per cent. provided that it refers to "in every case".

Mr. George Cunningham: I recognise that, because you have accepted such an amendment as being in order. I am asking why it is in order to modify the figure of 2 to a figure of 1 when it is not in order to modify the words "in every case". Both are of the same degree of fundamentality to the resolution. I shall not proceed on this point, but if this is the practice of the House then in this respect, as in so many others, the practice of the House needs altering.

The Chairman: I can only repeat that the Committee can debate the question of a reduction in the amount.

5.45 p.m.

Mr. John MacGregor: I beg to move Amendment No. 4, in page 1, line 16, leave out '2' and insert 1'.
In listening to the most recent exchanges, I began to think that we would never have a debate on the substance of these provisions. I was as worried as the hon. Member for Islington, South and Finsbury (Mr. Cunningham) that, because of the tight way in which the Ways and Means Resolution has been drawn, a dangerous precedent could be established for all future Finance Bills under which we could have only a Second Reading debate but no Committee stage whatever and no opportunity to amend the Bill or to introduce any other elements into it.
In my opening remarks, I wish to link the discussions about the unseemly haste with which the Bill is being pushed through with the points of order to which the House has just been listening. Such an exercise would help to highlight the points which the Opposition—and also, it appears, some Labour Members—are forced to put forward on this amendment.
Let us look at what concerns the Opposition on these provisions. There is, first, the double standard that has been adopted in respect of the time taken by the Government in introducing the Bill and the time to be devoted to debate. I do not wish to labour the point because it has already been made by other hon. Members. We all know about the speed with which the measure has been brought before the House, but I am equally concerned about the way in which matters have proceeded thereafter.
On Second Reading on 6th December, the Minister of State, Treasury, said this on charities:
The fact that the Bill may become law without an amendment will not inhibit us from listening to those representations and considering them in depth, and if it turns out—I make no commitment—that we think that we should accede to them it will be possible to put the matter right before the tax is introduced on 6th April."—[Official Report, 6th December 1976; Vol. 922, c. 147.]
What concerns me—and this is a relevant matter because the amendment will

help charities—is that the Government do not seem to have taken representations before bringing the Bill before the House and, furthermore, are not prepared to allow the House to put representations. Apparently, somehow or other, they will in some mysterious way accept representations after the Bill has gone through, and then put it right. That seems to me to be a gross double standard, and certainly a disgraceful way in which to treat debates. If we are to accept that the Government may be allowed to do this in respect of charities, why not in respect of other matters?
This leads me to deal with the second double standard, which relates to different interested groups. It seems that Churches and charities are a good thing—and I make no complaint about that because I agree—but that the self-employed and small businesses are not. We have heard no reference to them, and today we are precluded from debating an amendment which would have specifically helped very small businesses. There is a different standard there, and all we can do in debating this amendment, which is to some extent a blunderbuss of a weapon, is to concentrate on its provisions because it is the only way of substance in which we can deal with this matter. All one can say about charities and small businesses in this context is that the amendment will at least help them as well as others.
I turn to the effect of the amendment, which will reduce the surcharge of 2 per cent. to a figure of 1 per cent. In effect, it will reduce the increase in the totality of insurance contributions on employers from 23 per cent. to 11·5 per cent.—it is an 11·5 per cent. amendment. Presumably, the effect of the amendment on the public sector borrowing requirement in this respect broadly will be to halve it or slightly less than halve it. In other words, the effect presumably will be in the region of £350 million to £400 million. I put the figure at £400 million because one of the arguments which I advance in favour of the amendment is that the employment effect will be less as a result of the amendment and, presumably, there will be an impact by that means on the PSBR. The figure of 11·5 per cent. still represents a large increase in the total wage bill to be met by employers. Indeed, it will represent


an increase of 11·5 per cent. on their insurance contributions.
So much for the effect of the amendment. I turn to the reasons why we put it forward. If we cannot get rid of this iniquitous measure altogether, let us seek to alleviate its harmful effects.
First of all there is the impact on all employers. The point was made in the Second Reading debate that since the measure was first announced on 22nd July, the economic circumstances surrounding all employers have changed substantially. Originally the Government argued that the surcharge would not have a serious effect on emloyment, prices or general economic prospects because there would be a significant upturn in the economy by the time the effects worked through after next April. But since then we have seen a deterioration in the economic situation. We have seen uncertainties about whether world trade will turn up in the way the Government hope. Although the President-elect of the United States intends to reflate the American economy there are doubts about the extent to which he can do so and about the impact this will have on world trade.
The downturn in growth in the United Kingdom economic prospects must be clear to any hon. Member who has talked to companies. We now see that expectations for price increases are much greater, not least because of the depreciation of sterling. Although the expectation now is that prices will rise faster than expected on 22nd July, that does not mean that it will be any easier for employers to pass on the effects of this measure. Indeed, it will be harder because the effect of the higher rate of inflation next year means that there will be less consumer demand, tighter competition, and much less scope for passing on price increases.
Then there has been the significant increase in interest rates, which has contributed to the deteriorating confidence in British industry. There is also the uncertainty about the proposed price increases by OPEC countries. It is not surprising that, compared with three months ago, employers who are asked about their prospects and plans for the next 12 to 18 months now say that they are waiting to see what will hit them

next. There is a tremendous lack of confidence.
Even since the Second Reading debate there has been a new impact on employers which was announced yester day—the new national insurance increases. The effect of this on employees is concentrated on that group with whom the Chancellor claims to be so sympathetic, namely the middle management, because the increase does not affect anyone earning less than £95 a week. This means that a very large part of the salary increase these people received under this year's phase of the pay policy will disappear in the increased national insurance contribution. Leaving that aside, there is the effect on employers which is highly relevant to this measure.
Admittedly, the intention to introduce the surcharge was announced some time ago, and it does at least relate to the National Insurance Fund. Nevertheless, a large number of employers are not conscious of this new imposition on them from next April and they do not appreciate the effects of this increase together with the national insurance increases. I understand that another £380 million, on top of the £950 million, will be added to employers' bills next year as a result of the combination of these two measures. I cannot believe that this will not have a significant effect on their cash flow given the economic circumstances which I have described. The combination of this measure and the new national insurance increase announced yesterday will add substantially to problems related to cash flow and this will affect profitability.
Then there is the impact on retailers. On Monday the Minister of State tried to deal with this in the debate. He said:
The position of distributors is different because the Price Code does not permit them to increase their prices solely on the ground that their overheads have gone up. However, the cost of the goods that they sell will have risen because of the surcharge and distributors will be permitted to add their normal mark-up to these increased costs. The position about the surcharge is no different under the Price Code from what it is in relation to other costs."—Official Report, 6th December 1976; Vol. 922, c. 148.]
That is very small comfort for many distributors. It takes no account of the fact that in many cases their total turnover has gone down, and it is not a proper answer to the criticisms they have made.


I have talked to the management of a large distributor company today and they are greatly concerned about this matter. These measures will have substantial effect on the large companies—direct mail, mail order and retail—and therefore, they will bear even more heavily on the small ones.
I do not think that the Government have given us a satisfactory answer about the effect of the measure on local authorities. We know that 61 per cent. of the total increase will be handed back through the rate support grant, but the extra element still has to be obtained from the ratepayers. If the amendment is passed it will alleviate the burden on local authorities.
The Government should also answer the question on nationalised industries which was posed by the hon. Member for Thurrock (Dr. McDonald) during the Second Reading debate. She has an amendment on this matter on the Order Paper, because she received no answer earlier in the week. At least her amendment will help the nationalised industries.
We must consider the general position of profits and prices and the effect on companies. I believe that the Government's general case so far is quite inadequate. On prices the Financial Secretary said during the Second Reading debate that he expected that the bulk would be passed on over a period. He said that there would be no substantial immediate effect as would be the case with a VAT increase. I urge him to tell us over what period the bulk will be passed on. I think that the Financial Secretary is trying to have it both ways. He says that in the short term there will be no significant effect on the retail price index but in the long term the bulk will be passed on. I think that much less will be passed on, and that the effect on profits will be more significant. Here again the amendment would help on prices.
As far as profits are concerned, I know that companies can offset the increased charge against corporation tax but many companies pay nothing like 52 per cent. corporation tax because of investment allowances and so on, and therefore there will not be a 52 per cent. offset for them. After corporation tax is taken into

account the Government expect £950 million revenue to come from this measure. That figure shows what the effect will be on companies.
We had a very interesting argument from the Minister of State about profits when he quoted a brief extract from Phillips and Drew. That firm estimated that profits of industrial companies would rise by 20 per cent. It is fascinating that the Minister of State should rely on that firm rather than on his own Treasury forecasts. That does not give anyone very great confidence. Although Phillips and Drew is a very reputable company, there are many other views about profits next year, and it seems extraordinary for a Minister to relate his case entirely to the view of one stockbroking firm.
The Minister argued that because profits would increase by 20 per cent. there was plenty of slack to cover the surcharge. I think that he has taken no account of the very low base from which this increase begins. From memory I say that the broad figures are that the rate of return on capital has declined from about 13 or 14 per cent. in the early 1960s to less than 4 per cent. now. That is, by a very long way, an inadequate rate of return if we are to get the confidence, investment and growth that we all seek.
We have therefore, to face the fact that there must be an increase in profits not of 20 per cent. but of something very much more to get back to the levels which even the Financial Secretary will admit are necessary. For this reason I did not find his point about a 20 per cent. increase persuasive.
6.0 p.m.
There was another point to which the Financial Secretary did not give me an answer on Monday evening. It is that when we have the new inflation accounting system we shall see the true level of profitability in British industry. I know that we shall not see that next year, but from many of the estimates and calculations which have been done it appears that the figures we shall see then will not be realistic but that the true profitability of British industry will show through in the following year. The Financial Secretary took no account of that point. If he is to rest his case upon the suggestion that profits may increase by 20 per cent.


next year, his case must be very weak indeed.
There must therefore be considerable doubt whether the Government are right in their forecasts and general beliefs about unemployment, prices and profits. I believe that they are engaging in guesswork, and we would see whether they were right but for the fact that the impact of this measure will be clouded by the IMF loan measures, which we are about to debate, and which will equally have an effect on unemployment, prices and profits.
I believe that the amendment would help the problems of unemployment, prices and profits. I accept that there would be a substantial effect on the public sector borrowing requirement, but it would be very much less than getting rid of the Bill altogether. I calculate the effect to be somewhere between £350 million and £400 million. It would be easier for the Government to seek genuine savings from the waste in current expenditure in the public sector, which they should have sought in the first place, than it would be for them to throw the Bill out altogether.
The amendment has much to be said for it, if we cannot get rid of the Bill completely. It will help to shift resources back to the productive sector of employment, whether in the public or private sector. It will produce a reduction in the proportionate share of the burden assumed by that productive sector. Until we can get a real shift back it will be right to call measures such as this—as my hon. Friend the Member for Guildford (Mr. Howell) described them—as the job destruction programme. At least my amendment would help to mitigate the effects of that job destruction.

Mr. Ian Stewart: My hon. Friend the Member for Norfolk, South (Mr. MacGregor) moved the amendment with his usual skill, and I hope that the occupants of the Treasury Bench will take careful note of what he said.
It is wrong that only in this way should the House be able to consider the impact of the proposed surcharge on any of the categories to which it will apply in terms of the rate at which it is to be charged. Obviously a 2 per cent. surcharge is a considerable amount of money. Certain figures were quoted when the Chancellor

first introduced the measure in July, and slightly revised figures were given on Monday, but I wonder whether we have yet had the right figures on which to consider the impact of the surcharge. On Monday we heard comments from the Financial Secretary and the Minister of State about the impact. The Financial Secretary said:
The Bill provides that the surcharge will be paid by employers from 6th April next year on the same basis as that on which they pay national insurance contributions in respect of their employees. It will apply, that is to say, to earnings under £95 a week."—[Official Report, 6th December 1976; Vol. 922, c. 33.]
But the next day, tucked away in the Written Answers, the Secretary of State for Social Services said:
I am required under the Social Security Act 1975 to review each year the general level of earnings in Great Britain and to consider what changes in national insurance contributions need to be made in the light of movements in earnings and other relevant factors. In fulfilment of this obligation, I have today laid a draft order which requires the approval of both Houses, setting out revised rates and earnings limits to take effect from 6th April l977."—[Official Report, 7th December 1976; Vol. 922, c. 156.]
In other words, within 24 hours the whole process on which the House had been led to understand that the yield of this tax was related to a maximum limit of £95 in earnings per week had been changed. What was the basis of the Financial Secretary's calculations on Monday? Had the Secretary of State bothered to mention to the Financial Secretary that he had it in mind to change the figures and to produce higher ones? One would expect an uprating to be made at this time of year, and it surely must have been in the mind of the Financial Secretary when he produced those figures.
The juxtaposition of the Second Reading debate and the financial information provided in it on Monday, and the announcement the following day of the rate at which it is to apply next year, when the surcharge is first to come into operation, seems to make nonsense of any opportunity this House has had to consider the rate at which the surcharge is to be levied and the revenue that it will produce.
Are we to understand that the figures given to us on Monday for the gross yield and the net effect on the public sector borrowing requirement were related to


assumptions about a £95 per week maximum? Were they stated to relate to that, but calculated on rates which the Financial Secretary knew his right hon. Friend would be announcing within 24 hours? If not, may we have updated figures this afternoon? Is it not late in the day for us to consider fundamental questions of yield on a tax like this, when a major announcement relative to the consideration of the rate and yield is made on the one intervening day between Second Reading and the remaining stages of a major piece of tax legislation?
So we should consider all the more urgently whether the rate of 2 per cent. is supportable by all those on whom it is to be charged. The hon. Member for Islington, South and Finsbury (Mr. Cunningham) had exchanges with you, Mr. Deputy Speaker, about the way in which the Ways and Means Resolution has been tabled. Our procedures permit us only to discuss the rate and not the applicability of the tax. The only way in which we can consider its effect on those to whom it applies is in relation to the rate itself.
I therefore believe that my hon. Friend the Member for Norfolk, South was justified in raising again the question of the impact of a 2 per cent. rate with its very large yield, which, by definition, will have a very high impact on small businesses, on industry, on churches and charities, and so on, next year. It is difficult to believe that if the Government intended, in July this year, to impose a 2 per cent. surcharge from which they would exempt, by some technical means, Churches and charities, they started to think about the problem only on Monday of this week. I simply cannot believe in the Government's good faith. They have left it too late to consider ways and means of achieving this. Yet, if the rate was 1 per cent., it would be much less difficult for charities, and although it would be a heavy impost it would be less damaging to them and to those they employ. The same applies to the impact of this surcharge on industry and those in industrial employment.
Since July—as is now well known to everyone, it seems, except the Treasury forecasters who always wake up to these things about six months late—there has been a fundamental change in economic

circumstances. It has not all originated in this country. I accept that much of the change has been caused by changing circumstances in the world at large. But can it be right that the economic and financial strategy involving a 2 per cent. surcharge, which was thought right in those hot days of July, still applies with the same force in the chill of December, when we know that all the forecasts made at that time have gone wrong? We know that many sectors of the economy have experienced new and in some cases unacceptable difficulties, and that the whole outlook for the coming year has changed.
That outlook has largely been changed by the Government themselves. They have been unable to keep to their money supply targets, because of their own improvidence. They have spent all the money themselves, and have had to deny money to the private sector. They have put restraints on bank lending which will have an effect on the level of company prosperity and profits in 1977.

Mr. Tom Litterick: I have followed the hon. Gentleman's argument with interest. I agree that the circumstances have changed. Does the hon. Gentleman agree that this change is not peculiar to Britain, or the British economy? In fact, there has been a marked change in the economic prospects of every economy throughout the developed world. Heads of State and Prime Ministers in Western Europe and North America have made the same statements about the change in circumstances. Does the hon. Gentleman agree that it is not something peculiar to Britain?

Mr. Stewart: I accept everything that the hon. Gentleman said. I thought that was what I said myself. I said that there was a change not only in this country but also overseas. To that extent, much of it was outside the Government's control. I readily admit that.
I was also trying to make the point that there were certain events within the Government's control. To that extent it was a matter for them to consider in the light of their whole economic strategy. That is a fair point to make, whether it comes from hon. Members below the Opposition Gangway or from myself.
I shall take my argument a stage further, and I hope that I can carry the


hon. Gentleman with me. We are now approaching a fundamental reappraisal of the balance of the economy, the amount of money raised by taxation, and the incidence of taxation between direct and indirect taxes. No doubt surcharges like the insurance contribution are all part of it. At this moment the Government are actively trying to weigh up the relative merits and demerits of a different mix of cuts and taxes, and so on. The Opposition are generously seeking to give the Government another opportunity for a little more flexibility in their decisions by having the chance to reconsider the level at which this so-called National Insurance Surcharge—thought up so long ago, in economic terms—is to be levied.
6.15 p.m.
The Government cannot have ignored the consequence when they have been thinking about the package which they will produce in the hope of satisfying the IMF, our international creditors and financial opinion. An amendment relating to the proposed rate of surcharge would be a blessing to the Government. It would give them an opportunity to reassess whether the full rate of 2 per cent. impost is justified in the light of changed circumstances without climbing down from the principle. However, the exact rate is a matter for the Government. So long as they can carry the Committee on an amendment such as this, it gives them the chance to say that although being imposed at a rate of 2 per cent., it is something that will have to be reconsidered if circumstances change in future.
One cannot believe that an impost of this sort is meant to be a tax for all time. After all, taxes are reviewed annually in the Budget and I think this one ought to be as well. It was introduced in a sort of mini-Budget in the summer without a Finance Bill. Already, sufficient time has lapsed and there has been sufficient change in economic circumstances to make it not only suitable but necessary for the Government to reconsider the rate at which this surcharge is to be imposed.
The fact that the Government are compressing consideration of the Bill into these few days, and the fact that by next week a major package of measures is bound to be put before the House, makes it nonsensical to consider this measure in isolation from all the rest.
The fact that no change in the 2 per cent. rate has been made since July suggests that the Government have gone blundering on, as they have with all their economic measures, oblivious to the changes which have taken place by the lapse of time. Is it not right that in contemplation of next week—much better still, in conjunction with next week's measures—the opportunity should have been taken to consider the effect on businesses, let alone the difficulties that have come to light in respect of Churches and charities? All this should have been reconsidered at one time.
I return to a point that I made earlier. It is about the draft order that was laid before the House yesterday by the Secretary of State. He said:
I have today laid a draft order which requires the approval of both Houses."—[Official Report, 7th December 1976; Vol. 922, c. 156.]
Does that approval have to be sought? I do not know whether we were innocent enough to believe it, but we were told that the reason why the Bill had to be streamrollered through the House of Commons on Monday and today was that if we left it a moment later the Government would not have time to fiddle their calculators and print off the tables. If they are presumably to build in a lot of different figures to the order presumably they will have to tear up all the figures that they had on the stocks and started off with. If that is not the case, why can they not reconsider the rate next week, when we have the whole of the economic package to consider?
This measure is being forced through the House for utterly specious reasons. Those specious reasons have been brought forward solely to justify getting the Government out of a tactical spot because they have brought in a measure which is clearly no longer at a proper rate. They do not want it to be mixed up with consideration of the fundamental issues of the economy that affect it.
They want it out of the way before next week, so that they can say to the IMF "Bravo. We forced through another £1 billion of irrelevant taxes last week. You will not try to make us force through any more irrelevant taxes, will you?"
We must consider the whole strategy in the context of next week's measure. That


is the real slip in the Government's tactics, and is the explanation arising from the Secretary of State's statement, that the new rates at which this surcharge will apply have not been approved by the House. They have to be approved by the House. They will not be approved by the House today. Therefore, the whole case for forcing through the Bill containing this particular rate, suggested so long ago, is a load of old boloney.

Mr. George Cunningham: I want first to apologise to the hon. Member for Guildford (Mr. Howell), because on Monday evening at the end of the Second Reading debate, in the course of his winding-up speech, when he gave a number of figures for the likely effect of the Bill on a number of charities which he named, I intervened to question whether his figures could possibly be correct. I did so on the ground that the figures he gave for the savings would occur only if a charity had a wages bill in the region of £5 million or £6 million. I doubted—I still look on it with some disbelief, but it is true—whether those charities would have a wages bill in the region of £5 million or £6 million. I have not checked all the cases, but I have checked Dr. Barnardo's. I understand that its wages bill is running at about £6 million a year. Therefore, cost of the order which the hon. Gentleman indicated, and perhaps slightly higher, will be the consequence of the Bill. I apologise to the hon. Gentleman for questioning the figures that he then gave, which were absolutely correct.

Mr. David Howell: I am very grateful to the hon. Gentleman for what he says. I appreciate it very much.

Mr. Cunningham: Secondly, I must say that the practice of Governments in bringing forward usually Money Resolutions but in this case a Ways and Means Resolution so tightly drafted that we cannot have consideration even of very germane amendments—amendments that are absolutely fundamental to the very spine of the Bill—must stop. Once the Government have brought forward a tax and the House has passed it, the responsibility for anything wrong with that tax passes from the Government to those of us who voted for it. Therefore, as one of those who voted

for it, I must tell the Government that if they do not stop this practice they will have to be stopped because it makes nonsense of the proceedings in this place if we are prevented from discussing the amendments which naturally occur and which would be very natural ones to consider in the course of passing the Bill.
I hope that that consideration will be taken on board in the course of preparing Money Resolutions and Ways and Means Resolutions for the future. It is not a question only for this Government. All Governments do it. It makes life much easier for them. If they are to go on being insensitive to the requirements of the House in that respect, they will have to be stopped by the use of the power of the House, whether legitimate, by means of voting, or by the dirty tricks, by means of obstructing other business which normally goes through the House on the nod.
The proposal to put a 2 per cent. tax on top of the national insurance contribution is one which in the normal way I should be deeply opposed to, partly because I think it is important for the national insurance contribution to be, and be seen to be, a contribution for the benefits that come out of the National Insurance Fund. Not all hon. Members share that view. The Liberal Bench, now empty, has frequently argued that we should get rid of the National Insurance Fund concept and instead fund national insurance benefits simply out of taxation.
On that argument, Liberal Members cannot object to the mixing up of a revenue-raising device with the national insurance contribution. It is important to distinguish between the two in order to bring home to people just how much it costs to provide them with national insurance benefits, and particularly the retirement pension, which is the most expensive one of the lot. They do not understand it very clearly at present, but they will never understand it if, in addition to the normal national insurance contribution, there is a bit that does not go into the National Insurance Fund, which is not required for or used for the benefits but is syphoned off to the Consolidated Fund as a normal tax.
However, I am prepared to accept that in present circumstances this is an extremely cheap way of raising a lot of


money—a cheap way in the sense of being one which I should have thought cost practically nothing to collect, in that it is as easy to calculate 10¾ per cent. of a figure as it is to calculate 8¾ per cent. of a figure. It raises much more than could so cheaply be raised by any other form of taxation. Given the need to bridge the gap—or at least close it a bit—between revenue and expenditure, it seems to me that in present circumstances this device is perfectly honourable, honest and reluctantly, acceptable. I should have preferred it if it had been an explicitly temporary measure, however. It should have a self-destruct built into it because of its basic offensiveness. I hope that we can be told that the Government are not committed to the maintenance of this device in perpetuity but will give it up as soon as—within the next two or three years, say—other means can be found to raise whatever money needs to be raised by more conventional means.
As for the difficulty about charities, I wonder whether we can be told whether the law as it exists could be used to exempt charities and Churches from the burden of the Bill. For example, I think that ministers of religion who would under the normal provisions of the 1975 Social Security Act be treated for national insurance purposes as employees, because they pay Schedule E tax and not Schedule D tax, were switched to being regarded as self-employed persons for national insurance purposes by means of a regulation made by the Minister, taking effect, I think, in April 1975, under the powers conferred by the 1973 Social Security Act.
If I remember correctly—I have not been able to put my finger on the provision at short notice—the 1973 Act, now consolidated into the 1975 Act, gives the Minister a power to make regulations providing that although, in the normal way, such and such a category of people would be employees, they will be treated as self-employed, or vice versa. The Minister has the capacity, by regulation, to switch people between the various categories of earners. I do not know, but it just may be possible to get round the Churches' difficulties temporarily by continuing to regard ministers of religion as self-employed people for the time being. Certainly, if I were the Archbishop of Canterbury, and more so if I were one of his financial advisers, I should want

to extend the position in which ministers of religion were regarded as self-employed people for this purpose for a bit longer, given the severe impost that will otherwise rest upon the Church.

Mr. MacGregor: That is an ingenious proposal, but is it not a fact that ministers of religion could not be classified as self-employed for this purpose only, but would have to be so classified for all purposes?

Mr. Cunningham: I think so, under the provision that I was thinking of when I said those words. But what do they lose by that? They lose the possibility of unemployment pay, which probably they very rarely draw, and the benefit of the earnings-related supplements. Given the earnings of most ministers of religion, that probably does not amount to much. I should have thought that, on the whole, it was in their interests to be treated as self-employed, if the only reason why the Government have, I understand, been pressing them to regularise the position and accept employee status is that it is the normal thing for people who pay tax under Schedule E.
The whole idea of the 1973 Act in this respect, to have people treated as employees or self-employed people for both purposes, was not to have an untidy situation such as existed before. Given this additional difficulty of ministers being categorised as employees, it would probably make sense for the Church to seek to continue the position whereby they are regarded as self-employed for the time being, while this 2 per cent. surcharge exists.
There is another section of the 1975 Act, Section 2(1), which perhaps could be used. It says that:
Regulations may provide (a) for employment of any prescribed description to be disregarded in relation to liability for contributions otherwise arising from employment of that description".
It appears that that could exempt prescribed categories of people from the 2 per cent. contribution without exempting them from the 8¾ per cent. contribution. I have no doubt that such a thing was not in the minds of those who drafted the Bill, but it does seem that there is a wide power for the Minister to exempt any category of employment from any obligation to pay a contribution under the Act.
It might be held that that constituted an authority to exempt any category not only from the whole contribution but also from part of the contribution. I hope that the Minister will look at the law as it exists, because we cannot amend the Bill in this respect. I hope that he will consider whether it is possible either to find a means of exempting charities and Churches from the obligation to pay the 2 per cent. contribution, or to find some way of making a refund of the money after it had been paid.

6.30 p.m.

Mrs. Margaret Bain: Like the hon. Member for Norfolk, South (Mr. MacGregor), who moved this amendment so eloquently, my hon. Friends and I oppose the Bill and, we intend to go through the Lobby with him. The amendment is at least an alleviation of the effects of the Bill. My party takes the same attitude to this Bill as to the devolution Bill which will come before the House next week. Half a loaf is better than nothing at all, and this amendment will, at any rate, alleviate the situation.
I was bemused when the hon. Member for Islington, South and Finsbury (Mr. Cunningham) said that this was an easy way for the Government to raise finance. It may be easy and straightforward, but the hon. Gentleman pushed aside the whole question of the price to be paid by the community for that ease. He should refer to the closing stages of the Second Reading debate on Monday.
The hon. Gentleman would discover that the Minister of State, Treasury, said that
the effect of this tax on employment will be 10,000 jobs lost by the end of the fourth quarter after the introduction of the tax."—[Official Report, 6th December 1976; Vol. 922, c. 149.]
I am surprised that a member of a party which campaigned on the slogan "Back to work with Labour" can say so glibly that this measure will keep people out of employment and yet not come with us to vote against it.
Money should not be taken from employers in this way, but left with them, so that they can invest to maintain employment that is desperately needed. In my constituency employers have advertised for one apprentice and received

60 applications, including some from people with university degrees in engineering who have found that no employment is available. We shall not gain employment by taking away money which should go back into industry to create investment throughout the whole country, not just in Scotland.
I want to emphasise, as I did on Monday, that small businesses will be badly hit. Money lending rates are high, and costs for all small businesses are so great that increasingly they are being forced to close up shop, thus creating unemployment. This is particularly important in Scotland, where there are so many small companies.
My party will oppose any measure which will make things more difficult for small businesses and I recommend my hon. Friends to have no hesitation in supporting the amendment. I hope that some of the hon. Members opposite who criticised the Bill on Monday will have the courage of their convictions tonight and go into the "No" Lobby on Third Reading.

Mr. George Younger: I should like to add my voice to that of my hon. Friends and to that of the hon. Member for Dunbartonshire, East (Mrs. Bain) in attacking the savage effect which this imposition will have on small businesses. It is a shabby measure.
In the summer the Government found themselves in need of revenue and they cast around until they found an area where it would cause least embarrassment at that time. They found business and industry which do not, directly, have votes, and put the imposition on them, thinking that this would have the least impact upon the Government's popularity.
The trouble is that the Government, in doing this sort of thing, talk about industry as a large number of huge concerns. There are hundreds and thousands of employers without huge departments and staffs to maintain their financial affairs. The Government imagine that all these impositions go through the books and after several months, or even longer, come out in increased prices to the consumer. The trouble is that this Government still have not realised that the vast majority of businesses in this country are very small, although they account for well over one-third of jobs.


These are businesses of all sorts. They range from farms to fishing boats, shops, engineering works and factories of various kinds.
I want to impress upon the Minister that this imposition may appear innocuous, but the majority of small businesses are already battered and bruised by the effects of incredibly high inflation, soaring rates and costs, and the effect of the Price Code, which prevents employers from passing on costs by way of prices as quickly as they may need to in order to recoup extra costs. Many of these small firms are already struggling and many are on the verge of extinction.
If the Minister thinks I am exaggerating, I shall illustrate my argument by telling him about a meeting in my constituency last weekend. It was attended by small business people from the area. They expressed to me, in the strongest possible terms, that I should try to bring home to everyone in Parliament the fact that these businesses are now facing severe difficulties. Yet this measure, which the amendment seeks to alleviate, imposes on such businesses an extra 2 per cent. on their national insurance contributions. The amendment has only the modest aim of reducing this severe imposition by half.
I want to illustrate to the Minister what this will mean to small businesses. An employee on less than average earnings, about £50 a week, will cost his employer an extra £52 a year.
I know of one small business, a dry cleaner's—obviously, I shall not mention the name of the firm—which is suffering from severe difficulties. The company came to me for help recently because the recession had caused a drop in the use of its services and because it faced rising costs. This firm employs 20 people, with average earnings, since many of the staff are part-time, of about £50 a week. The extra amount which will have to be paid each year by that company because of this imposition will be over £1,000. That is the difference between life and death to this business, which is already facing possible extinction.
This imposition will, beyond the slightest shadow of doubt, throw a considerable number of small firms out of business. As a result, it will throw a

considerable number of people on to the dole. Therefore, the amendment, which seeks to halve the effect of the imposition, is one that we should take seriously. It is a great pity that, because of the way in which the Ways and Means Resolution is drawn, we cannot talk about exceptions for certain categories of business, but at least we can use the lowering of the rate as a sort of blunt instrument to help those who will be hardest hit, as well as those who have more strength to resist the difficulties.
I hope that the Minister will explain how the impact of this surcharge on Churches and charities can, if he so decides, be put right later. How can it be put right when the Bill has been enacted? Can he take action by an order or will there have to be new legislation if it is found necessary to exempt some categories?
The Minister should tell us not only that he will listen to representations and deal with any difficulties later, but satisfy us on the means to be used for this purpose and explain whether we shall be able to take part in the process of deciding those means. Our constituents are daily making further representations.
The amendment ought to be welcomed by hon. Members on both sides of the House. The Minister can be assured that if he accepts the amendment he will save a considerable number of jobs and avoid considerable additional costs to the Exchequer.
I hope that the Government will not again resort to this method of raising extra money when they have difficulty in raising revenue—as they seem to have every month. It is a shabby way of raising revenue, and is imposed on people who are already under great pressure and severe difficulties.
Unless we nurture these small businesses and avert from them extra impositions which will make life intolerable for them they will start going out of existence by the dozen in every constituency. The House is thoroughly disgusted with this measure, but this amendment would at least go some way to alleviate its effects.

Mr. Ted Leadbitter: I indicated on Second Reading my concern about the effect of this Bill on industry and the public utilities, and gave various


examples of what happens when legislation is brought forward in haste in this way.
After years in the House, it is to me a remarkable experience to be discussing a Bill of this magnitude and for there to be only three selected amendments on a measure which affects every employer in the United Kingdom, every business, and charities of all kinds, and which seems to have been brought forward without the slightest consultation with any of the interests involved. That cannot be good government. I agree with my hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) that, in the light of our proceedings this week, the House must, some time, make up its mind to call a halt. In the light of parliamentary procedures consequential upon our membership of the Common Market and certain Government practices we must seek ways to take back some power to ourselves in order to prevent us from becoming a rubber-stamp Chamber.
The current economic situation puts us in a dilemma. It has been suggested that the Bill is a cheap way of bringing in revenue, but the use of employers as tax collectors should not commend itself to reasonable people. We have seen this development in the operation of VAT. Do the Government not understand the heartache, frustration and despair felt by many small employers as they attempt to meet their quarterly VAT demands and do it for the Government for free?
We should watch this tendency. If there are stresses and strains in this building, we must remember that there are excessive stresses and strains outside among people who find it very hard to keep up with the amount of paper work required to meet Government demands.
6.45 p.m.
The Government attempted to ease the minds of hon. Members by saying that this measure would be spread thinly and uniformly throughout the economy and that there would be no discrimination. That sounds very nice; but it is unreasonable in a mixed economy where there are differences between regions, different conditions of trading between employers, and different demands upon business, industry and the public services. There have been

attempts to persuade us that there is merit in spreading the effects of the Bill uniformly, but the consequences will be very different from those forecast by the Government.
I have been thinking carefully about how I should vote, for the Government must take into account that hon. Members have been unable to make reasoned contributions because they have not had time to think through the consequences of the Bill. No debate can make sense if we seek to examine a Bill by intuition, and seek to suggest amendments on the basis of personal experience, but without all the facts We have little information before us and we do not really know the effects on individual employers and charities.
I suspect the Government do not know either. They have mentioned global sums, and referred to £900 million coming from the private sector, £400 million from the manufacturing sector, and rough calculations of the amount which will have to be paid by local authorities, who will, however, have a clawback of about 60 per cent. in the rate support grant. There has been no information about the detailed effects. The House is uninformed and we must, therefore, act on intuition.
I suggest that the Government may be faced with increased unemployment as a result of this Bill. As I said on Monday, an employer who faces increased costs because of this 2 per cent. tax—which is a misuse of the National Insurance Scheme procedures—and who wishes to keep his carefully calculated overheads at the same level in order to remain competitive may have to put people out of work.
It seems, therefore, that in areas of high unemployment, and in regions such as mine, also Scotland, Merseyside and Wales, we shall be placed in the unhappy position, with an already heavy and burdensome public cost of maintaining 1½ million unemployed, of adding to those social costs, knowing full well that we might have avoided that situation if we had taken time with this legislation.
I hope that this hasty method of producing this kind of measure will be stopped, and that the Government will realise that neither the Treasury nor the DHSS has any crystal ball. I do not think anyone in those Departments has


any greater expertise or experience than can be found in the House of Commons when we have to discuss matters like these and how they affect the general public. I suspect very much that the House of Commons has more sense in these matters. Therefore it should be given the time to give the proper kind of advice to the Government.

Dr. Alan Glyn: I shall be very brief, Sir Meyer. I am surprised at being able to endorse just about everything said by the hon. Member for Hartlepool (Mr. Leadbitter). This is a major fiscal measure. It is an extraordinary way of raising money. I know that one has to be very careful in speaking to this amendment, which I commend my hon. Friend the Member for Norfolk, South (Mr. MacGregor) for bringing forward. It gives us an opportunity to talk about the effect of the Bill. This may be an easy way of raising money, but is it a desirable way? The answer, as the hon. Member for Hartlepool said is "No". I do not think this is the way to raise money to please the IMF.
If the amendment is accepted it will at least reduce the impact on a very hard-pressed section of the community—the small business man. He is already called on to produce a great deal of money. The Bill will particularly hit those small businesses with between five and 50 employees, which are finding life very difficult. If the amendment is accepted they will find life only half as difficult.
It is very undesirable that this extra 2 per cent. contribution will have to be borne by Churches and charities. I am glad the Minister is listening. I think he told us that he might find some way of dealing with this point. We know what the Prime Minister's reactions have been. We do not need to spell it out. His refusal to see the Archbishop of Canterbury was a most unusual step, in our constitution.
At least my hon. Friend's amendment does something to reduce the effect of the Bill, which will have a very serious impact on employment in small businesses which are, as the hon. Member for Hartlepool rightly said, once again being called upon to be the tax collectors for the Government. This is not the right

way to proceed. This is a hasty measure, and neither the Churches nor charities will thank the Government for it.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): In my response to the contributions that have been made I shall start by commenting on the speech by my hon. Friend the Member for Hartlepool (Mr. Leadbitter). He made two important points that certainly need to be closely examined. He referred to the problems of unemployment—to which shall be referring later—but on the other point I think I can offer him some assurance. That matter concerned the burden falling on the smaller businesses and smaller employers, and the paperwork that my hon. Friend is worried about as a result of the introduction of this legislation.
The idea behind the legislation was that it would be purely a surcharge on the national insurance contribution. I do not seek to deny that it is a form of taxation, but it is a form that is operated in an easily administered manner, just by making a surcharge on a national insurance contribution. The extra paperwork for the small employer or any employer is quite minimal, whereas the problems for the small business man in operating VAT produce a number of complications of the kind which my hon. Friend described, including the need for quarterly returns. This will not be the case with the National Insurance Surcharge. It will be a purely straightforward surcharge on the contribution. This was one of the major attractions, for reasons which I shall be going into.
The debate started with the hon. Member for. Norfolk, South (Mr. MacGregor) dealing with the problems of the self-employed and small businesses. I am sure that was an error and an oversight on his part, because he must realise that the self-employed are not involved. Small businesses will find that this measure will be rather easier than perhaps most of the practicable alternatives that might have been introduced, for the very reason that it does not bear heavily on any particular sector. Being a very broad-based tax—about as broad-based a tax as one could reasonably introduce—its impact on any particular type of business or any particular part of the industrial or commercial sectors will be much reduced.
Whereas some taxes can have very heavy and sometimes damaging effects on certain businesses, this one, being widespread, is unlikely to have a difficult impact on specific industries. That is one of the reasons why we are introducing it. Other reasons are to obtain a reduction in the public sector borrowing requirement of about £700 million as a result of the revenue arising, and its low burden upon individual organisations because of the very wide base of the tax.
Two further advantages that we saw were the effect on prices, which, as I indicated on Second Reading, will work its way through very slowly, and at a level much below that of the alternative methods of raising tax, and the unemployment consequences, being much less than those to be expected from any of the alternatives. Of course we cannot be complacent about any projected increase in unemployment, but the basic fact is that if we attempt to take out of the economy large sums of money, such as those involved in this legislation, we cannot escape from the consequences of a reduction in demand and increases in unemployment which immediately arise therefrom. The only thing we can say is that they are very much less as a result of this measure than they would have been in the case of a number of the alternatives that we have looked into. If this had been a direct tax, the increase in unemployment would have been much higher. As for achieving our object by public expenditure cuts—I was interested to see that in the Second Reading debate the hon. Member for Guildford (Mr. Howell) promised to cast off his last veil and tell us what he would cut, and then sat down fully clothed. Perhaps as time goes on we shall get closer to it.

Mr. John Nott (St. Ives): Tomorrow.

Mr. Sheldon: Tomorrow, perhaps—but like many tomorrows, tomorrow is a day that never comes for some.
7.0 p.m.
The consequences of the amendment would be that so far from the surcharge raising £950 million in 1977–78, the figure would be cut by half. There would be a reduction of £475 million in the revenue receipts; revenue that is needed if we are to implement the policies of last July.

Clearly, that is a sum of money that is so enormous that we cannot accept an amendment of this kind, the consequences of which would be very serious.
There is also the problem of failure to reduce the public sector borrowing requirement—a failure to the extent of £350 million. That is half of the projected £700 million by which the PSBR would otherwise have been reduced. The major financing problem of the high PSBR would be with us at a very serious level.
The hon. Member for Norfolk, South referred to the effect upon local authorities. He said that he had gone into this matter with some care and that he understood that 61 per cent. of the surcharge would be met from the rate support grant. He is quite right in that. What would not be met would be the 39 per cent.—that is, 39 per cent. of the 2 per cent. That would be payable by local authorities. I would not wish to minimise the consequences. I merely present the figure for what it is.
The hon. Member accepted that the increase in the profitability of companies might very well reach the 20 per cent. that is projected by Phillips and Drew. He further pointed out that profitability, as he saw it, was too low, and that this increase would be needed for reasons other than paying the surcharge. However, as I mentioned on Second Reading, with some care, it is my belief—I still believe this to be true—that the bulk of this surcharge will work its way into prices. The hon. Gentleman is right when he says that there are consequences for unemployment. The surcharge cannot totally be passed on in prices, and part of it will be passed into unemployment. I have accepted that, and I gave the figure of 10,000 jobs, which is much less than the figure would be with any other method of raising such sums. Part of it is likely to come out of profits. However, again I believe this to be a very small effect. When one considers the 20 per cent. increase in profits as quoted by Phillips and Drew, one can appreciate that this is a relatively small aspect of a problem that is much larger.

Mr. MacGregor: In regard to the Minister's previous point about local authorities, even taking the point about the rate support grant, the plain fact is


that in my own county council in Norfolk, for example, this will add an extra £390,000 to the cost on the rateable element. When county councils and other local authorities are being forced to make very big cuts in school programmes and all sorts of things, such extra sums make a very big difference.

Mr. Sheldon: I understand that. I have not sought to conceal that it will impose a widely-spread burden over all areas of the community, whether in local authorities, businesses or elsewhere. The point that I have sought to make is that being a small element over such a very large base, the problem for individual areas of our economy is likely to be less concentrated and so more readily endurable.
The hon. Member for Hitchin (Mr. Stewart) asked whether the yield from this surcharge was related to the new national insurance earnings limits which have recently been announced or whether the figures had been computed by reference to those that are currently in force. The figures are based on the new limits, and so take account of most of the likely effects that we shall see during the introduction of the measure.

Mr. Ian Stewart: I do not want to throw this back at the Minister, but does that mean that his statement as reported at column 33 of Hansard for 6th December—that the surcharge would be on the same basis as national insurance was being paid; that is to say, earnings under £95 a week—taken in conjunction with the figures that he quoted on Monday for the practical reasons that he was not able to reveal the true figures—was incorrect?

Mr. Sheldon: The position generally is that when one makes estimates for the future, be they for revenue or other purposes, one makes projections as to the likely levels of earnings and the various other factors involved. That is how these figures are calculated—otherwise we would never attain anything like the accuracy that we are able to achieve for some figures.
My hon. Friend the Member for Islington, South and Finsbury (Mr. Cunningham) made a general reference to Ways and Means Resolutions. In the broad approach that he adopted, I am sure that he was referring to the nature of

various documents. We must find more satisfactory ways of discussing not only taxation measures but Bills in general. Although I take my hon. Friend's particular point concerning financial legislation, I am sure that there are areas in which we can improve our procedures. What he has to say on these matters has much in common with what I believe to be necessary.
My hon. Friend referred to the advantage of this tax in being a revenue raising method that uses the national insurance machinery as an extremely cheap way of raising a lot of money. That is one of its greatest attractions. He said that he would have been happier had it been introduced as a temporary measure, being brought forward as an urgent need to meet a temporary situation. That was its principle attraction to the Treasury. However, as to the temporary nature of it, it is not for me to say what will happen two or three years from now. We shall watch its progress with interest to see how it fits in. We note that the burden on employers will shift somewhat—although I accept the differences that have been mentioned—towards the kind of relationship that exists between the levels of employers' taxes on the Continent for different purposes. Nevertheless, it is still a burden. We shall need to see how this goes, the effects that it creates and the burdens that become evident.
I refer finally to the contributions concerning the Churches and charities. My hon. Friend the Member for Islington, South and Finsbury pointed out the possibility of changing the categorisation of certain individuals from employees to being self-employed. I am not able to comment in detail upon that matter. I should like to consider it. I can foresee a number of problems at this stage, and the matter needs further consideration.
However, on the whole of this subject I have undertaken to receive representations, without commitment. I look forward to these in order to appreciate the nature of some of the problems, to see how they might be alleviated and how account may be taken of some of the valuable points that have been made, particularly some of those made here today.
This measure will be of value. T believe that it meets our urgent need for


high levels of revenue to reduce the level of the public sector borrowing requirement by substantial amounts. The amendment would have serious consequences for that strategy. Therefore, I am unable to commend it to my right hon. and hon. Friends.

Mr. David Howell: The amendment halves the surcharge, but frankly that does not reflect our heart's desire on this subject. We have made no secret that we would be done with it altogether. We urged in the summer that public expenditure should be cut instead. The humiliation with the International Monetary Fund and all the traumas that followed might have been avoided if our advice had been taken. The amendment halves the difference between what we would like and what the Financial Secretary would like, and it is in order. We welcome that, although we had something approaching a seminar from the hon. Member for Islington, South and Finsbury (Mr. Cunningham) in linguistic philosophy to establish why it is in order. Even now I am not sure that I am entirely clear, but there it is. It has had a better fate than other of our amendments that were ruled out of order by the tightness of the Ways and Means Resolution.
A whole number of matters have been raised in the debate. Lowering the surcharge by 1 per cent. would bring benefit to all groups and classes, including many on which we would have liked to move special amendments. In particular, it would help the Churches and charities, about which the Financial Secretary was speaking.
I shall deal with the Churches. I think that the Government have made asses of themselves over the whole question of the Archbishop meeting the Prime Minister. I do not know where the original idea came from, but I should imagine that by the time it was seen at Number 10, the Prime Minister was not, to use his current phrase, "over-impressed" by the proposition that he and the Archbishop should settle down to sort out this tax mess.
The Financial Secretary and the Minister of State said that they would put the matter right. That is an odd situation.

Mr. Robert Sheldon: I did not say that.

Mr. Howell: The Minister is quite right. He did not say that he would put the matter right. I shall quote him exactly:
The fact that the Bill may become law without an amendment will not inhibit us from listening to those representations and considering them in depth, and if it turns out—I make no commitment—that we think that we should accede to them it will be possible to put the matter right before the tax is introduced on 6th April."—[Official Report, 6th December 1976, Vol. 922, c. 147.]
This is a very unsatisfactory situation. How will they put the matter right? The Bill is passing through the House of Commons and it will become law. What changes or admendments will be proposed to enable either the surcharge to be paid back to the charities and the Churches or for the Churches and charities to be excluded? If so, then, as my hon. Friend the Member for Norfolk, South (Mr. MacGregor) rightly said, why not other small businesses and concerns which will be roughly treated by this legislation?
This is an extraordinary state in which to leave the legislation. We find it unsatisfactory, as no doubt do the Churches and charities. I do not see how the Minister will put the matter right—if he considers that it should be put right—without amendments. The idea that we should pass the Bill and then leave it to the loving and tender care of the Treasury is absurd and insulting to our intelligence. We are pressing the amendment because we find the Treasury's proposals totally unsatisfactory.
Hon. Members have said again and again that this is part of the Government's vendetta against small businesses. This is part of the same family as the proposal for a wealth tax—which is a direct attack on the interests of working people in small businesses—the capital transfer tax and the multiple rates of VAT, which are the source of chaos and difficulty and are driving small business men to despair.
We are dealing with 6 million working people. Their lives will be affected by this vendetta and by the fact that the employers will have to pay an extra surcharge. They will know just who is promoting their interests and who is calling for a wealth tax, multiple rates of VAT, and so on, which will smash up small businesses and cause damage to medium-sized businesses as well. It ill becomes


the Government to claim that they are doing something to help small businesses, when the record of bankruptcies has never been higher.
The next reason concerns the regions. We have had contributions by Members representing different parts of the United Kingdom, including Scotland—if we are still allowed to call that part of the United Kingdom by that name—by the hon. Member for Dunbartonshire, East (Mrs. Bain). There is no doubt that an additional employer tax—a payroll tax—in the regions now will be a wicked thing. It would be tough. All parts of the United Kingdom will be hurt, and Northern Ireland will come top of the list.
It is curious that on Monday the voice and the vote of Ulster was missing from our debate. I find that extraordinary. I cannot understand why, knowing a little about the Ulster economy, the voice and vote of the representatives of Northern Ireland were not made clear in a positive way in the House.
7.15 p.m.
Of all the kinds of industries and industrial structures that will be smashed by this surcharge, Ulster will be at the head of the list, particularly because of its reliance on the textile industry. That industry will not be able to pass on the prices. It is absurd for the Financial Secretary to argue that he believes that the surcharge will be passed on in higher prices. Has he spoken to no one in the textile industry? It is not in a position to raise prices now.
This surcharge will bite deep into the Ulster economy. When I think of the terrific work being done by Ulster employers and trade unionists, under appalling conditions, to maintain employment and to get business into Northern Ireland, it concerns me that not one of the representatives for Northern Ireland in this House could bring himself to speak up and vote against this wicked impost on the Northern Ireland textile industry and the building industry. Everyone knows that the building industry is in great peril. This tax will kick it when it is already down.
On the question of distribution and retailing, we need more clarification, perhaps on Third Reading or through

another amendment, if we cannot have it now. The Minister of State said:
The Price Code does not permit them
—referring to distributors—
to increase their prices solely on the ground that their overheads have gone up. However, the cost of the goods that they sell will have risen because of the surcharge and distributors will be permitted to add their normal mark-up to these increased costs."—[Official Report, 6th December 1976; Vol. 922, c. 148.]
If I understand that aright, it means that they cannot push up prices and they will have to sack employees. They will have fewer hands in the shop, whether part-time or full-time—full-time where the employer's contribution is required. Further, it will work through in substantial bankruptcies and unemployment in the retail and distributive trades. That is the inevitable outcome of this measure.
The Minister said that perhaps distributors will manage to put up prices anyway. I do not think that they will be able to do that. Not only are the market conditions bad; the new Secretary of State for Prices and Consumer Protection is a very ambitious price controller. He is very fond of sitting on prices. There are rumours that he will try to override Treasury Ministers and sit on the prices of nationalised industries' products. We hope that Treasury Ministers will stand firm against that one, because that would smash up their very strategy, such as it is. However, the new Secretary of State is an ambitious and determined price controller, and I am sure that he will see that no prices are passed on in this area or in other areas. It will all come out in unemployment.
That brings us to the heart of this matter. This proposal is a part of the Government's job destruction programme. It will lose jobs for many more people in the spring, summer and winter of next year, just as there are now many more people out of work than there have been for a long time because of the cowardice and inadequacy of past Government proposals.
My hon. Friends were right to raise the matters which they have raised, to press them and to recognise that this is a totally unsatisfactory measure. But if we could at least halve the rate we would do half the damage, and half the number of people would be thrown out of work.

Question put, That the amendment be made:—

The committee divided: Ayes 229, Noes 245.

Division No. 18.]
AYES
[7.19 p.m.


Adley, Robert
Grant, Anthony (Harrow C)
Neave, Airey


Aitken, Jonathan
Gray, Hamish
Nelson, Anthony


Alison, Michael
Griffiths, Eldon
Neubert, Michael


Amery, Rt Hon Julian
Grimond, Rt Hon J.
Onslow, Cranley


Arnold, Tom
Grist, Ian
Oppenheim, Mrs Sally


Atkins, Rt Hon H. (Spelthorne)
Grylls, Michael
Page, John (Harrow West)


Awdry, Daniel
Hall-Davis, A. G. F.
Page, Rt Hon R. Graham (Crosby)


Bain, Mrs Margaret
Hamilton, Michael (Salisbury)
Page, Richard (Workington)


Baker, Kenneth
Hampson, Dr Keith
Parkinson, Cecil


Banks, Robert
Hannam, John
Pattie, Geoffrey


Beith, A. J.
Hastings, Stephen
penhaligon, David


Bell, Ronald
Havers, Sir Michael
Percival, Ian


Bennett, Dr Reginald (Fareham)
Hayhoe, Barney
Price, David (Eastleigh)


Benyon, W.
Heath, Rt Hon Edward
Pym, Rt Hon Francis


Berry, Hon Anthony
Henderson, Douglas
Raison, Timothy


Biggs-Davison, John
Hicks, Robert
Rathbone, Tim


Blaker, Peter
Hodgson, Robin
Rees, Peter (Dover &amp; Deal)


Body, Richard
Holland, Philip
Rees-Davies, W. R.


Boscawen, Hon Robert
Hooson, Emlyn
Reid, George


Bottomley, Peter
Hordern, Peter
Renton, Rt Hon Sir D. (Hunts)


Bowden, A. (Brighton, Kemptown)
Howe, Rt Hon Sir Geoffrey
Renton, Tim (Mid-Sussex)


Boyson, Dr Rhodes (Brent)
Howell, David (Guildford)
Ridley, Hon Nicholas


Braine Sir Bernard
Howells, Geraint (Cardigan)
Rifkind, Malcolm


Brittan, Leon
Hunt, David (Wirral)
Roberts, Michael (Cardiff NW)


Brocklebank-Fowler, C.
Hurd, Douglas
Roberts, Wyn (Conway)


Brotherton, Michael
Hutchison, Michael Clark
Rodgers, Sir John (Sevenoaks)


Brown, Sir Edward (Bath)
James, David
Rossi, Hugh (Hornsey)


Bryan Sir Paul
James, R. Rhodes (Cambridge)
Rost, Peter (SE Derbyshire)


Budgen, Nick
Jenkin, Rt Hon P. (Wanst'd &amp; W'df' d)
Sainsbury, Tim


Bulmer, Esmond
Jessel, Toby
St. John-Stevas, Norman


Butler Adam (Bosworth)
Johnson Smith, G. (E Grinstead)
Shelton, William (Streatham)


Chalker, Mrs Lynda
Johnston, Russell (Inverness)
Shepherd, Colin


Churchill W. S.
Jones, Arthur (Daventry)
Shersby, Michael


Clark, Alan (Plymouth, Sutton)
Jopling, Michael
Silvester, Fred


Clark, William (Croydon S)
Kershaw, Anthony
Sims, Roger


Clegg, Walter
Kilfedder, James
Skeet, T. H. H.


Cope John
Kimball, Marcus
Smith, Cyril (Rochdale)


Cordie John H.
King, Tom (Bridgwater)
Smith, Dudley (Warwick)


Cormack, Patrick
Kitson, Sir Timothy
Speed, Keith


Costain, A P
Knight, Mrs Jill
Spence, John


Crawford, Douglas
Knox, David
Spicer, Michael (S Worcester)


Crouch David
Lamont, Norman
Sproat, Iain


Crowder, F. P.
Langford-Holt, Sir John
Stainton, Keith


Dean Paul (N Somerset)
Latham, Michael (Melton)
Stanbrook, Ivor


Dodsworth Geoffrey
Lawrence, Ivan
Steel, David (Roxburgh)


Douglas-Hamilton, Lord James
Lawson, Nigel
Steen, Anthony (Wavertree)


Drayson, Burnaby
Le Marchant, Spencer
Stewart, Donald (Western Isles)


du Cann, Rt Hon Edward
Lester, Jim (Beeston)
Stewart, Ian (Hitchin)


Durant, Tony
Lewis, Kenneth (Rutland)
Stokes, John


Eden, Rt Hon Sir John
Lloyd, Ian
Stradling Thomas, J.


Edwards, Nicholas (Pembroke)
Loveridge, John
Tapsell, Peter


Elliott, Sir William
Luce, Richard
Taylor, R. (Croydon NW)


Emery, Peter
McAdden, Sir Stephen
Taylor, Teddy (Cathcart)


Ewing, Mrs Winifred (Moray)
MacCormick, lain
Tebbit, Norman


Eyre, Reginald
McCrindle, Robert
Thomas, Rt Hon P. (Hendon S)


Fairbairn, Nicholas
Macfarlane, Neil
Thompson, George


Fairgrieve, Russell
MacGregor, John
Townsend, Cyril D


Farr, John
Macmillan, Rt Hon M. (Farnham)
Trotter, Neville


Fell, Anthony
Madel, David
van Straubenzee, W. R.


Fisher, Sir Nigel
Marshall, Michael (Arundel)
Viggers, Peter


Fletcher, Alex (Edinburgh N)
Marten, Neil
Wainwright, Richard (Colne V)


Fletcher-Cooke, Charles
Mates, Michael
Wakeham, John


Forman, Nigel
Maude, Angus
Walder, David (Clitheroe)


Fowler, Norman (Sutton C'f'd)
Mawby, Ray
Warren, Kenneth


Fox, Marcus
Maxwell-Hyslop, Robin
Watt, Hamish


Freud, Clement
Mayhew, Patrick
Weatherill, Bernard


Fry, Peter
Meyer, Sir Anthony
Wells, John


Galbraith, Hon T. G. D.
Miller, Hal (Bromsgrove)
Welsh, Andrew


Gardiner, George (Reigate)
Miscampbell, Norman
Wiggin, Jerry


Gilmour, Rt Hon Ian (Chesham)
Mitchell, David (Basingstoke)
Wigley, Dafydd


Gilmour, Sir John (East Fife)
Moate, Roger
Wilson, Gordon (Dundee E)


Glyn, Dr Alan
Monro, Hector
Winterton, Nicholas


Godber, Rt Hon Joseph
Montgomery, Fergus
Younger, Hon George


Goodhart, Philip
More, Jasper (Ludlow)



Goodlad, Alastair
Morgan, Geraint
TELLERS FOR THE AYES:


Gorst, John
Morgan-Giles, Rear-Admiral
Mr. John Corrie and


Gow, Inn (Eastbourne)
Morris, Michael (Northampton S)
Sir George Young.


Gower, Sir Raymond (Barry)
Morrison, Hon Peter (Chester)





NOES


Abse, Leo
Fowler, Gerald (The Wrekin)
Morris, Charles R. (Openshaw)


Allaun, Frank
Freeson, Reginald
Morris, Rt Hon J. (Aberavon)


Anderson, Donald
Garrett, John (Norwich S)
Moyle, Roland


Archer, Peter
Garrett, W. E. (Wallsend)
Murray, Rt Hon Ronald King


Armstrong, Ernest
George, Bruce
Newens, Stanley


Ashley, Jack
Gilbert, Or John
Noble, Mike


Ashton, Joe
Ginsburg, David
Oakes, Gordon


Atkins, Ronald (Preston N)
Golding, John
O'Halloran, Michael


Atkinson, Norman
Gould, Bryan
Orme, Rt Hon Stanley


Bagier, Gordon A. T.
Gourlay, Harry
Ovenden, John


Barnett, Guy (Greenwich)
Graham, Ted
Padley, Walter


Barnett, Rt Hon Joel (Heywood)
Grocott, Bruce
Palmer, Arthur


Bates, Alf
Hamilton, James (Bothwell)
Park, George


Benn, Rt Hon Anthony Wedgwood
Hardy, Peter
Parker, John


Bennett, Andrew(Stockport) N)
Harper, Joseph
Pendry, Tom


Bidwell, Sydney
Harrison, Walter (Wakefield)
Phipps, Dr Colin


Bishop, E. S.
Hart, Rt Hon Judith
Price, C. (Lewisham W)


Blenkinsop, Arthur
Hatton, Frank
Price, William (Rugby)


Boardman, H.
Healey, Rt Hon Denis
Rees, Rt Hon Merlyn (Leeds S)


Booth, Rt Hon Albert
Heffer, Eric S.
Roberts, Gwilym (Cannock)


Bottomley, Rt Hon Arthur
Hooley, Frank
Robinson, Geoffrey


Boyden, James (Bish Auck)
Horam, John
Roderick, Caerwyn


Bradley, Tom
Hoyle, Doug (Nelson)
Rodgers, George (Chorley)


Bray, Dr Jeremy
Huckfield, Les
Rodgers, Rt Hon William (Stockton)


Brown, Hugh D. (Provan)
Hughes, Rt Hon C. (Anglesey)
Rooker, J. W.


Buchanan, Richard
Hughes, Robert (Aberdeen N)
Rose, Paul B.


Butler, Mrs Joyce (Wood Green)
Hughes, Roy (Newport)
Ross, Rt Hon W. (Kilmarnock)


Callaghan, Rt Hon J. (Cardiff SE)
Irvine, Rt Hon Sir A. (Edge Hill)
Rowlands, Ted


Callaghan, Jim (Middleton &amp; P)
Irving, Rt Hon S. (Dartford)
Ryman, John


Campbell, Ian
Jackson, Colin (Brighouse)
Sandelson, Neville


Canavan, Dennis
Janner, Greville
Sedgemore, Brian


Cant, R. B.
Jay, Rt Hon Douglas
Selby, Harry


Carmichael, Neil
Jeger, Mrs Lena
Shaw, Arnold (Word South)


Carter, Ray
Jenkins, Hugh (Putney)
Sheldon, Robert (Ashton-u-Lyne)


Cartwright, John
John, Brynmor
Shore, Rt Hon Peter


Castle, Rt Hon Barbara
Johnson, James (Hull West)
short, Mrs Renée (Wolv NE)


Clemitson, Ivor
Johnson, Walter (Derby S)
Silkin, Rt Hon John (Deptford)


Cocks, Rt Hon Michael
Jones, Alec (Rhondda)
Silkin, Rt Hon S. C. (Dulwich)


Cohen, Stanley
Jones, Barry (East Flint)
Silverman, Julius


Coleman, Donald
Jones, Dan (Burnley)
Skinner, Dennis


Colquhoun, Ms Maureen
Judd, Frank
Small, William


Cook, Robin F. (Edin C)
Kaufman, Gerald
Spearing, Nigel


Corbett, Robin
Kelley, Richard
Spriggs, Leslie


Cowans, Harry
Kilroy-Silk, Robert
Stallard, A. W.


Cox, Thomas (Tooting)
Kinnock, Neil
Stewart, Rt Hon M. (Fulham)


Craigen, Jim (Maryhill)
Lambie, David
Stoddart, David


Crawshaw, Richard
Lamborn, Harry
Stott, Roger


Cronin, John
Lamond, James
Strang, Gavin


Crowther, Stan (Rotherham)
Latham, Arthur (Paddington)
Strauss, Rt Hon G. R.


Cryer, Bob
Leadbitter, Ted
Summerskill, Hon Dr Shirley


Cunningham, G. (Islington S)
Lee, Jonn
Taylor, Mrs Ann (Bolton W)


Davidson, Arthur
Lester, Miss Joan (Eton &amp; Slough)
Thomas, Mike (Newcastle E)


Davies, Bryan (Enfield N)
Lawis, Ron (Carlisle)
Thomas, Ron (Bristol NW)


Davies, Denzil (Llaneill)
Lewis, Ron (Carlisle)
Thorne, Stan (Preston South)


Davies, Ifor (Gower)
Litterick, Tom
Tierney, Sydney


Davis, Clinton (Hackney C)
Luard, Evan
Tomlinson, John


Deakins, Eric
Lyon, Alexander (York)
Torney, Tom


Dean, Joseph (Leeds West)
Mabon, Dr J. Dickson
Varley, Rt Hon Eric G


Dell, Rt Hon Edmund
McCartney, Hugh
Walden, Brian (B'ham L'dyw'd)


Dempsey, James
McDonald, Dr Oonagh
Walker, Harold (Doncaster)


Doig, Peter
McElhone, Frank
Walker, Terry (Kingswood)


Dormand, J. D.
MacFarquhar, Roderick
Ward, Michael


Douglas-Mann, Bruce
McGuire, Michael (Ince)
Watkins, David


Duffy, A. E. P.
MacKenzie, Gregor
Watkinson, John


Dunn, James A.
Mackintosh, John P.
Weetch, Ken


Dunnett, Jack
Maclennan, Robert
Weitzman, David


Eadie, Alex
McMillan, Tom (Glasgow C)
Wellbeloved, James


Edge, Geoff
Madden, Max
White, Frank R. (Bury)


Edwards, Robert (Wolv SE)
Magee, Bryan
Whitlock, William


Ellis, John (Brigg &amp; Scun)
Maguire, Frank (Fermanagh)
Willey, Rt Hon Frederick


English, Michael
Mallalieu, J. P. W.
Williams, Alan (Swansea W)


Ennals, David
Marks, Kenneth
Williams, Alan Lee (Hornch'ch)


Evans, Fred (Caerphilly)
Marquand, David
Williams, Sir Thomas (Warrington)


Evans, loan (Aberdare)
Marshall, Dr Edmund (Goole)
Wilson, William (Coventry SE)


Ewing, Harry (Stirling)
Marshall, Jim (Leicester S)
Wise, Mrs Audrey


Faulds, Andrew
Mason, Rt Hon Roy
Woodall, Alec


Fernyhough, Rt Hon E.
Maynard, Miss Joan
Woof, Robert


Fitch, Alan (Wigan)
Meacher, Michael
Wrigglesworth, Ian


Flannery, Martin
Mikardo, Ian
Young, David (Bolton E)


Fletcher, L. R. (Ilkeston)
Millan, Rt Hon Bruce



Fletcher, Ted (Darlington)
Miller, Dr M. S. (E Kilbride)
TELLERS FOR THE NOES


Ford, Ben
Miller, Mrs Millie (Ilford N)
Mr. James Tinn and


Forrester, John
Moonman, Eric
Mr. Peter Snape.

Question accordingly negatived.

7.30 p.m.

Mr. John Cope: I beg to move Amendment No. 9, in page 2, line 31, leave out subsection (6).
We propose this amendment to find out what the subsection does. It is obscure. Normally one could rely on the provisions of a Bill being explained on Second Reading or at least in Committee, but that has not been done. We want the Minister of State to explain the meaning of the provision.
The purpose of the first part of the subsection is relatively clear, subsection (5) having provided that
Any provision contained in or having effect under any enactment other than this Act or the Social Security Acts 1975 and applying in relation to a contribution with which a surcharge is payable under this section shall, subject to subsection (6) below, apply in relation to the contribution as if the surcharge were part of the contribution.
The first part of subsection (6) allows the Treasury to take out a piece of any enactment and to be selective about how it is applied. I cannot see the necessity for the second part of subsection (6). It appears to refer to subsequent enactments. Perhaps those will be to deal with points which have been raised by the Archbishop of Canterbury and others and which may make it necessary to amend the Bill before long. In that case, I cannot see why the subsequent enactments should not deal with them.

Mr. MacGregor: I am as puzzled as my hon. Friend the Member for Gloucestershire, South (Mr. Cope) about some aspects of subsection (6). I want to ask the Minister another question so that we know exactly what we are doing. What particular purpose has he in mind? Will he give one or two examples why the Treasury may wish to direct that subsection (5) shall not apply in a particular case. An answer to that question will be of help in understanding the subsection.

The Minister of State, Treasury (Mr. Denzil Davies): The amendment has been moved to try to divine the purpose behind subsection (6). The hon. Member for Gloucestershire, South (Mr. Cope) said that he was particularly concerned with the second limb of the subsection. To explain that I must return to subsection

(5) because subsection (6) leads on from it.
Briefly, subsection (5) provides that references to secondary Class 1 contributions in other legislation be construed as including the surcharge. It is designed to ensure that employers, when dealing with legal requirements, know what the reference point is. It provides for the contribution and the surcharge to be treated as one at all times. Subsection (5) brings them together to ensure that the contribution and the surcharge, for the purpose of paying over money, are treated as one.
An example of how it will operate can be found in its possible relation to the Price Code. Employers' national insurance contributions will be allowable costs under the code. Subsection (5) enables employers to treat the surcharge as an allowable cost increase for justifying price increases under the code. Since national insurance contributions are allowable under the code, and because they are contained in subsection (5), it automatically follows that the surcharge should be allowable.
Subsection (6) makes it possible by order to dissociate the two elements again. Subsection (5) brings them together and the first limb of subsection (6), if necessary, enables the two to be kept apart.
Another example can also be given from the Price Code. The present Price Code will run for only three months from the time when the Bill is in operation because it runs out in July. If representations were made in respect of the Price Code as it affects distributors, and if the Government accepted—as yet they have not—those recommendations because they felt that distributors were being unduly affected, subsection (6) provides for legislation to be amended accordingly. That is the kind of situation that is envisaged. Subsection (6) is a safety net in case it is found that it is not always to the benefit of employers to concertina the two elements together.

Mr. MacGregor: Is the Minister saying that the Government have no specific examples in mind, that they do not intend to do anything, but that the provision is there in case it is needed?

Mr. Davies: Yes, it is there as a safety net in case it is found that it is not always


to the advantage of the taxpayer, in the kind of example I have given, to have the two brought together.
The second limb is there to ensure that any separation in the future is done by legislation. The Bill allows the national insurance contribution and the surcharge to be brought together. By order under the first part of subsection (6) it is possible to move them apart again, but that applies only to existing legislation and not to future legislation. With future legislation the scheme of the Bill applies, and if it is necessary to move the two apart it has to be done in the future enactment itself. It is a constitutional safeguard.
I seem to remember debating a similar subsection in the European Communities Act. I suspect that the draftsman took parts from that Act and put them into the Bill. This is a constitutional safeguard to ensure that any future change is made by the Act itself and that there cannot be power by order to bind Parliament in the future.

Mr. Cope: The Minister is obviously trying to be helpful, and I am grateful to him. I am, however, slightly concerned. He said first that the purpose of subsection (5) is to ensure that the new contribution will be an allowable cost under the Price Code. Immediately after that, he almost took that back again. That is a disturbing example to give to the House of the first element of subsection (6).
The second limb of subsection (6) seems to be totally unnecessary. The first limb says clearly:
shall not apply to any specified provision contained in an enactment passed before this Act".
I do not see how that can apply or be thought to apply to any subsequent enactment. The second limb seems to be unnecessary and merely to add confusion. No one could possibly read into the first limb that subsequent enactments can also be altered. It does not apply to future enactments. There is no need for the second limb giving Parliament the power to override the Bill if it becomes an Act. Parliament has the right to overrule any Act or any subsection in an Act.
In the second limb the following words appear:
or having effect under any enactment.
I am not sure what those words mean. I understood what the Minister said about subsequent enactments, but what do those words introduce into the subsection?

Mr. Denzil Davies: The hon. Gentleman said that the second limb of subsection (6) is unnecessary. I have great respect and regard for the hon. Gentleman, and I can only say to him that the draftsman is of the opinion that it is necessary. That is the draftsman's advice, and how he drafted the clause. He has set it out clearly, and it is a constitutional safeguard.
The hon. Gentleman asked me the meaning of the words
or having effect under any enactment.
They refer not to an enactment but to an order taking effect under an enactment; it could be subordinate legislation. That is to make sure that the provision applies both to primary and to secondary legislation.

Mr. David Mitchell: This is a probing amendment put down by my hon. Friends to make sure that they understood what was in the Treasury mind. The Minister said that the subsection was there to enable employers to know certain matters. That stresses the point that it is not clear to my hon. Friends, after careful reading of the words, what is meant. My hon. Friends are more familiar with the terminology used in legislation than is, for example, the average small business man or anyone else outside this place.
I add a plea which, Sir Myer, you might occasionally almost feel like endorsing. I ask that in future we should have clauses before us which are a little more comprehensible, so that people can understand what they mean. If the Minister takes a special interest in that when future legislation comes before the House, this little debate will have done a great deal of good.

7.45 p.m.

Mr. Cope: I am afraid that I am not satisfied. I do not propose to press the amendment to a Division, but the subsection is unsatisfactory. The Minister of State is a lawyer—a very good lawyer, I


understand. I have been on Finance Bill Committees with him both before and since he was appointed to his present position, and have always found him clear and helpful in explaining enactments and prospective enactments to people like myself who are not lawyers and have to try to understand them. But he seems to be unable to explain why the draftsmen wanted or needed to include these words.
After all, if this constitutional safeguard is necessary to make clear what subsequent enactments may do, we shall have to have a subsection like this in every clause we pass. The constitutional safeguard depends not on these words but on the doctrine that Parliament is all-powerful and can alter any existing primary or secondary legislation. It is an unnecessary provision.
I dislike making Acts of Parliament more complicated by including unnecessary provisions, particularly provisions which are difficult to understand. I dislike the provision, but it is not worth taking up the time of the House to vote on it. Like other rubbish that clutters up our tax Acts, we must nod it through. On those grounds, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Clause 3

SHORT TITLE AND APPLICATION TO CROWN

Mr. Nicholas Ridley: I beg to move Amendment No. 10, in page 3, line 24, leave out 'Insurance' and insert Payroll Tax'
The purpose of the amendment is perfectly clear. It is to change the title of the Bill. Changing the title of the Bill changes not so much the name of the tax we are considering as the name of the national insurance contribution, that name which has been with us for many years and which is totally unsuitable and wrong to describe the levy about which we are talking.
I do not think that the Committee will quarrel with the suggestion that we should

bring up to date our nomenclature. The example I cite is that we used to have a poor law which became national assistance and is now called supplementary benefit. It has been thought right and proper to change that title to suit the fashion and jargon of the day and to avoid offending people's susceptibilities.
I support the general suggestion that we should use words that are more in keeping with the spirit of the times rather than use words that may have been appropriate at one time but are not appropriate nowadays. I submit that the words "national insurance" are totally inappropriate to describe the transfer payments that we are discussing. I can do no better than to quote the meaning of "insurance" in the Oxford Dictionary. The substantive definition reads:
The act or system of insuring property, life, etc.; a contract by which the one party undertakes, in consideration of a payment (called a premium), to secure the other against pecuniary loss, by payment of a sum of money in the event of destruction or of damage to property (as by disaster at sea, fire, etc.) or of the death or disablement of a person.
It is against that definition that I want to consider whether national insurance is insurance. I can do no better than to quote the circular from the Department of Health and Social Security that defends the contributions that the self-employed are called upon to pay. It uses so many words that make it clear that national insurance is not insurance.
My first example is the introduction of graduated contributions. When one insures a motor-car there are no graduated contributions according to income. The contributions may vary according to the size of the motor car or the goodness or badness of the driving record, but they are not graduated contributions based on a scale of earnings. That totally destroys the resemblance to insurance that originally the tax had.
I read in the circular that the Government have decided to increase the earnings-related Class 4 portion of the insurance contribution, which is paid only by the better off, from 5 per cent. to 8 per cent. That was in the previous round of increases. A new round was announced last week and I do not have


the details before me. The circular states:
The Government decided to do the latter in the belief that those with the broadest backs should bear the greatest burden.
That meaningful Socialist redistributive sentiment is not consistent with insurance. No insurance company would ever say to those who pay premiums to it for like benefits that the richer should pay the greatest contribution. This is a total abrogation of the whole idea of insurance. Insurance is a binding contract between the insurer and the insured, yet Governments of all colours have regularly changed the rules governing contributions, the rules for paying out benefits and the rates of benefit.
How anyone who pays a national insurance contribution can believe that he has a contract with the Government is beyond me. At will the contract is altered unilaterally by the Government. This very Bill is a unilateral alteration of the contract by the Government. They have increased the contribution by a considerable amount without any commensurate increase in the benefits that are being provided.
The Government admit that the Bill represents a tax on the national insurance contribution and the Financial Secretary described the proposal in the Bill as a broad-ranging tax. Nobody would quarrel with that. It is broad-ranging and it is a tax. Being that it is a tax, we are having a tax upon a tax. Equally, the rules of the contributions are altered the whole time. Sometimes they are graduated and sometimes they are not. Sometimes the onus is laid upon the employer and sometimes on the employee. There is also the tricky political calculation about how much the self-employed should pay, with all the special pleading that comes from it.
It would be wrong to pass judgment upon any of these facets of our system of payroll tax because that would be out of order. I merely cite instances where the contract has been unilaterally broken by the Government, which destroys any notion that this is insurance.

Mr. George Cunningham: Alterations are decided by Parliament, not by the Government.

The Chairman (Sir Myer Galpern): No sedentary interventions, please.

Mr. Ridley: The DHSS circular states:
The Class 4 contributions can in no way be regarded as a tax.
That is the most misleading statement that has ever emerged from a Government Department. After all, that is what they are, a tax, and we are seeing that tax being increased.
The last argument I deploy to destroy the notion that this is insurance is the point that was made at the end of Question Time by several of my hon. Friends—namely, that the National Insurance Fund is likely to go into credit to the tune of £800 million or £900 million by the end of the financial year. It is clear that the Fund is not being used solely as a means of providing benefits on an insurance basis. It is being used to store up a considerable sum for the benefit of the Government's economic policies. There are times when it has been running at a loss and times when has been running at a profit. There is no correlation in contractual terms between what the wretched contributor puts in and what he gets out, nor is there any such correlation between the income based contributions and the benefits that are paid out. To call this system "insurance" is one of the great misnomers of our time.
I wonder why the Government have always stuck to the term "insurance" and why the DHSS is so adamant that this is not a tax. Surely the reason is psychological. It seems that the Government think that people will the more readily pay their national insurance contribution or payroll tax, as I prefer to call it, if they believe that in some way what they put in they will get out as benefit at the other end. I suppose that it has some vague connection with true insurance in the mind of the gullible public. I suppose that there is the individual who thinks that he is paying in, albeit compulsorily, for the sake of his old age, distress or hardship that may befall him in one of the many forms that the National Insurance Scheme covers. That is highly misleading.
We know full well that the amount that the individual employee pays in is hardly one quarter of the value that he will get out. That is partly because the


taxpayer contributes, but mainly because the employer contributes a great deal. We build up in the minds of contributors the mistaken thought that as they have paid for their pension they should be able to get out this, that and the other. The truth is, although they do not know it, that they have not paid for even a tithe of the pension they get out, which is mainly paid by the employer and the taxpayer. There is a totally fallacious idea of the value of the contribution in relation to the value of the eventual benefit.
The Government have kept the word "insurance" because they like to keep alive the myth that this is in some way a sound insurance company paying out what is paid in and that people are specifically saving for their specific benefits at the end of their working lives. As I have demonstrated, nothing could be further from the truth. We have one politically motivated set of contributions and one politically motivated set of benefits. Whether the value of the two balance is entirely left to chance. It is in no sense contractually or actuarially correct.
8.0 p.m.
I think, therefore, that it is wrong to go on perpetrating this myth, and that it would be much better to admit that this is a payroll tax. The Government have taken this view in bringing the Bill forward. By imposing the surcharge on the contributions, they are quite openly saying that they no longer wish to pretend that the contributions which are being paid are solely and wholly for the benefit of the contributors when they retire, when they are unemployed, or in whatever other circumstances they may be. The contributions are a tax. They have been so described by the Government and have been admitted on all sides to be a tax.
If we have here this increase in the rate of tax for economic reasons, which have been discussed earlier—I do not wish to go into them now—we ought clearly to admit that the whole structure of the national insurance contribution is that of a political tax, politically aimed to put the brunt on to the employer and politically aimed to put a heavy burden on the self-employed.
We have had debates about this over and over again, and there is a difference between the two sides of the House as to what is fair and what is unfair.

Mr. George Cunningham: Hear,hear.

Mr. Ridley: The hon. Gentleman gives me my point. If he agrees that there is dispute about what is fair and what is not fair, he must equally agree that this just cannot be insurance, because there can be no dispute about what is a fair premium to pay in insurance. There can be dispute whether the premiums as a whole are too high to cover the risk, but there cannot be dispute whether certain groups of people should pay more or less. The nature of insurance is that it is a contract which any citizen can enter into irrespective of his means or circumstances.

Mr. George Cunningham: Does not the hon. Gentleman think that exactly the same considerations apply in the case of an occupational pension scheme, the cost of which falls upon the employee who pays part, the employer who pays part, and the Revenue which, through tax relief, normally bears at least 35 per cent. of the burden? The tax input to the State pension scheme, by means of the 18 per cent. Treasury contribution, is actually less than the tax input into most private pension schemes by means of tax relief on the contributions. There is no difference between the two situations.

Mr. Ridley: I do not quarrel with the hon. Gentleman but I remind him that they are called occupational pension schemes. They are not called private insurance as opposed to national insurance.
We are not here debating the merits of one scheme or another. I am merely sticking, with my accustomed assiduity, to the small point contained in the amendment—that the name is wrong. I should have thought the hon. Gentleman would agree that the name is wrong. He may not have liked my term payroll tax. He may have preferred some other term. But I believe that the time has come to jettison the term "national insurance". It is a payroll tax, and it is far better to be honest about these things.
There has been too much spoofing of the people by Governments over the years dressing up their schemes as one thing when they are something else, and providing mutton dressed as lamb. They use grand words in order to impress people. This is simply one more form of tax, and it is a form of tax which the Government have been building on very


rapidly. They have been increasing the yield of this form of tax far more rapidly than any other form of tax.
For the Government to resist the amendment and to say that they want to go on calling this an insurance contribution would in my opinion be almost dishonest. My arguments are totally convincing. I have ignored any contentious grounds about the merits of the tax. I have not spoken on the merits of the Bill. I am merely saying that we should now call a spade a spade. This is a tax. Let us call it a tax. Let us call it the payroll tax.

Mr. Cope: I wish to make two points in support of my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). First, it seems to me that the Government actually make things more difficult for themselves in some circumstances by their pretence that it is insurance. One example is the withdrawal of unemployment benefit from those over 60 with occupational pensions.
People are coming to me and to every other Member of Parliament and saying that as they have paid into the scheme for many years they deserve to get this benefit out, and that it is unfair to withdraw it. Whether or not it is fair to withdraw the benefit—I do not want to go into the merits of that on this Bill—the argument does not hold any legal water. It is not an insurance contract.
I accept that people have a moral entitlement to receive this benefit, but there is no financial or contractual requirement or obligation on the Government to pay it. The Government are entitled, if they wish, to withdraw the benefit. But that is a demonstration that it is not insurance. It is also making it more difficult for the Government to withdraw the benefit and to get away with the withdrawal of the benefit, which they wish to do. It makes it more difficult for the Government in that respect.
With regard to the tax relief on occupational pension schemes—a matter raised by the hon. Member for Islington, South and Finsbury (Mr. Cunningham) in his intervention—the point is that when we pay a contribution into a pension scheme of that kind we are allowed tax relief in that year. The tax is postponed until we actually receive the income. The purpose of this is quite simple, and it

arises from the insurance nature of the contract.
I will take a simple example. Suppose that there are two individuals, A and B, who have the same income over their working lives and contribute the same amount to an occupational pension scheme. Suppose it so happens that A dies before he retires and does not, therefore, receive any pension at all, whereas B lives for many years afterwards and dies at 104, having received a great deal of income as pension. It is clearly much fairer that B should be taxed on the income he receives as a pension at the time that he receives that income, even though many of A's contributions have gone to help finance his pension, and A, because he died, did not receive any.
It is a long-standing principle of the tax law that we pay tax when we have retired and are in receipt of the pension, rather than paying tax on what would otherwise be our gross income at the time we earned it.
I do not think that the hon. Gentleman's intervention is a valid one in that sense, but it helps to emphasise the true nature of a real insurance contract, and the tax treatment of it, and to show that the tax treatment of this proposal is quite different. For these reasons I support the amendment.

Mr. David Mitchell: I support my hon. Friend the Member for Gloucestershire, South (Mr. Cope). The amendment asks the House to delete "insurance" and to insert "payroll tax". As my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said in moving the amendment, it is in conformity with reality. It would be no bad thing to have our legislation drafted in conformity with reality.
My hon. Friend the Member for Gloucestershire, South raised a very interesting question when he asked whether this was insurance. I believe that the Government are now killing the myth that the National Insurance Fund is an insurance fund, and that they will live bitterly to regret having done so.
The Government have deliberately breached the Beveridge concept, and they need not have done so. I tabled a Question to the Chancellor of the Exchequer recently asking for information on the latest estimate of the contribution by the


Exchequer to the National Insurance Fund in the current year and during the year 1977–78. I was told that the estimate for this year was £1,343 million, and that the Government Actuary's Report, when published, would show the figures for that year. I have now seen that report. It shows, for next year, estimated Treasury contributions to the Fund of £1,518 million and £1,507 million. They could well have allowed that money to be paid into the National Insurance Fund and have left it there, instead of seeking to use it as a tax-collecting device. If they had done that, they would have kept sacrosanct the principle—which perhaps is a myth, but is a myth in which many people believe—that the National Insurance Scheme exists for their benefit.

Mr. Leadbitter: I have a good deal of sympathy with the hon. Gentleman's sentiments about the raising of this money, but he is dealing with the matter in a semantical way. If there is to be a transfer from the National Insurance Fund in the way he suggests, is he not advocating the very concept to which he is objecting?

Mr. Mitchell: In that case, I did not make my point clear. I meant to say that the Treasury is seeking to raise £1,000 million through the National Insurance Fund and is paying that sum into the Consolidated Fund. The average person will say "That is part of the money that will go into the Fund." It is a matter of semantics to deal with the question whose shoulders will bear the payments. By taking this money and paying it into the Consolidated Fund and then making another payment out of the one fund into the other, the situation leads to some confusion. The Minister need not make such a transfer. He should allow the money to go into the National Insurance Fund and reduce the Treasury contribution pro rata. If he had decided to take that course, most people would have understood what was happening. If the Minister had taken that course, the situation would have been more realistic. One can only ask why he did not do so.
I am worried lest that one reason why they do not wish to take that course is that they could have a limited ability to put one line into a future Finance

Bill to increase the figure from 2 per cent. to 4 per cent., or to some other figure.

Mr. George Cunningham: If the Government had the limited ability to get rid of the 2 per cent. at some time in the future, that would be even more worrying.

Mr. Mitchell: There is nothing to prevent the House of Commons repealing legislation. Indeed, we might be blessed by the country if, instead of legislating, we occasionally repealed measures.
My hon. Friend the Member for Cirencester and Tewkesbury said that people thought of the scheme as an insurance fund, even though that was not the case. I feel that these provisions might kill that idea and might damage the way in which people regard the National Insurance Fund. Once one starts using the term "national insurance" and breaches the Beveridge principle and alters the amount paid into the fund in line with the political or economic policies of the Government of the day, people will increasingly take a jaundiced view of the purposes of their contributions to a mythological insurance fund, because they will consider that politicians decide the benefits that are to be received.
8.15 p.m.
I am aware that the National Insurance Fund is not a true fund in the ordinary sense of the word. It pays this week's old-age pensions out of this week's contributions from those who are in work, and it does not have large sums of money on which to call. We should remember that our generation will rely on the next generation's contributions to pay our old-age pensions when we retire. If we bring the system into disrepute, we may discover that the next generation is not willing to make the kind of contribution that will give us the standards to which we should like to become accustomed.
The Government have lost a marvellous opportunity on this occasion. They should have made up the Consolidated Fund by reducing the payments made by the Treasury into the National Insurance Fund.

Mr. Denzil Davies: The hon. Member for Basingstoke (Mr. Mitchell) accused us of moving away from the Beveridge scheme and of abusing the National


Insurance Scheme. He suggested that a better way to proceed would be not to pay Treasury contributions into the National Insurance Fund, but to reduce the Treasury contribution. But if we had come to the House and said "In future we propose that the Treasury should not make a percentage contribution to the National Insurance Fund", I can well imagine what would be said by Conservatives and indeed by Labour colleagues, as to a change in the basis of the national insurance system.

Mr. David Mitchell: I do not want the hon. Gentleman to misquote me, but if he looks at Hansard tomorrow he will see that I spelled out a figure of £1,500 million as the anticipated contribution from the Treasury to the Fund next year. I was suggesting that £1,000 million of that sum could have come from these provisions, and that the Treasury contribution could have been £500 million. I was not suggesting an alteration of the total figure.

Mr. Davies: The hon. Gentleman suggests a partial reduction in the Treasury contribution to the Fund.
I turn to the comments made by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who appeared to suggest that our proposals amounted to a unilateral abrogation of a contract between the citizen and the Government in respect of the National Insurance Fund. There is no such abrogation of that contract. We make clear that the Bill seeks to
impose a surcharge, payable into the Consolidated Fund …".
This money goes not into the National Insurance Fund but into the Consolidated Fund. The National Insurance Fund remains intact, as do contributions to it.
The brunt of the hon. Gentleman's argument was that the designation national insurance "was not correct and that he would have preferred the term "payroll tax". It follows that if those contributions into the Fund were entitled "payroll tax" then the Fund should be regarded as a payroll tax. That may be so, but many of us would not accept a change in the name from "national insurance" to "payroll". I suggest that it is logical to regard this tax as a national insurance surcharge. I will concede that if we called national insurance contributions

a payroll tax the word would do for both things. But we are not changing the word for national insurance contributions, and as the tax is based on that scheme there is nothing inconsistent in describing this measure as a National Insurance Surcharge. It is a tax, and the money will go into the Consolidated Fund, not the National Insurance Fund.
The hon. Member also suggested that the tax applied to the self-employed. He may not have meant to imply this, but the suggestion was there. He knows very well that it does not apply to the self-employed; it affects only secondary class I contributions. Most people have realised that, but we do not want anyone to be under a misapprehension.
What the tax is called is a matter of semantics, and the present name for it reflects the underlying position of using the machinery of the national insurance system. We are not abusing that system in any way, because we are keeping the payments separate.

Mr. David Mitchell: Perhaps the Minister would answer a point which has been put to me by those interested in small businesses. They complain about the amount of work involved in doing PAYE and national insurance deductions. In the light of what he said just now about the way in which the two will be collected together, would he consider some way of simplifying the PAYE form? As the moneys are to be treated collectively and passed over to the Department, could not the coding be taken into account so that businesses did not have to fill in separate figures? It is all right for firms which have computerisation, but for those who still use a pen and ink there is a great deal of work involved. Would the Minister take account of this in the PAYE coding, and thus save an enormous amount of time and effort in the business community?

Mr. Davies: I will look into that, but obviously I cannot give a commitment. The essence of this tax is that it is a reasonably simple way of collecting the money. It is far simpler than VAT, which was introduced by the previous Administration, and which imposes an enormous burden upon small businesses. The whole object of this tax is to make things as simple as possible. However we will look into the point, and if there is some


way to make it even simpler we will consider it. On balance, this is a reasonably simple tax to collect, and it does not impose extra administrative burdens. That is why we chose this form, and that is why I ask the House to reject the amendment.

Mr. Ridley: The Minister has made a brilliant defence against an argument which I never put. I never claimed that this was not a tax, or that its name was wrong. Perhaps he misheard my speech. What I suggested was that national insurance contributions are a misnomer. He justified, with some skill, the use of the words national insurance surcharge in this Bill. But no one said it was wrong. What I was trying to get him to accept was that the national insurance contributions are not insurance, and he did not answer that point at any time.

Mr. Davies: But that has nothing to do with this Bill. I listened with interest to the hon. Member and I conceded that if we were to agree with him, national insurance contributions should be called a payroll tax. Then this measure would be called a payroll tax surcharge. But the debate is not about whether national insurance contributions are rightly named. It is about whether this tax is properly called the National Insurance surcharge.

Mr. Ridley: The Minister of State must not accuse the Chair of calling an amendment which is out of order. Clearly, the amendment could relate only to national insurance contributions. The Minister of State skilfully defended the Government against an argument which I did not put, and would never dream of putting. Still, that is what one must expect when one has a Welsh lawyer in a Labour Treasury team. That is such a difficult animal to grapple with that I shall never be able to lay it down. Therefore, I shall seek leave to withdraw the amendment, but I hope that on another occasion the Minister of State will respond to my arguments and tell me how a national insurance contribution can be conceivably described as insurance. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 ordered to stand part of the Bill.

Bill reported, without amendment.

Motion made and Question proposed, That the Bill now be read the Third time.

8.27 p.m.

Mr. David Howell: It is inevitable that at the end of a day of continuous discussion on a Bill which is being pushed through the parliamentary sausage machine at high speed, we should find ourselves repeating some of the arguments. I hope that I shall not be too tedious or too repetitive, but there are some issues on which we feel very strongly in relation to this very large tax increase. These bear repeating and, indeed, they should be re-emphasised.
There is one point which I must put to the Minister of State. I have high respect for his ability, and I very much admire the way he dropped into his present post rather suddenly, almost in the middle of one of our Finance Bills. However, it is a matter of regret to me that he has not seen fit to withdraw the statement he made on Monday evening when he referred to some figures which I gave as "wildly out". His hon. Friend has since made a handsome apology, but I am sorry that the Minister of State has not done so.

Mr. Davies: My hon. Friend has very graciously said that the figures were not, in fact, wildly out. At the time it seemed to me they were wildly out but on reflection I realised that they were not. If the hon. Gentleman wishes me to withdraw what I said, I do so of course.

Mr. Howell: I am grateful to the Minister of State. My regrets are banished and happiness reigns as far as it can reign in relation to this Bill.
I turn now to some of the things said by the Financial Secretary. I share some sympathy with him, if he does not regard that too much as a poisoned chalice, over the difficulties he is in. During the Second Reading debate on Monday he had a very difficult problem. He wanted to use arguments against our propositions and in favour of raising the tax in this way which were relevant to the situation back in July. The measure is entirely relevant


to the situation of that time. But July's disasters have long since been overtaken by September's and October's disasters. These have been overtaken by December's humiliations. Each crisis and each set of errors has led to a further crisis and a further set of errors. We in the House have been in a position similar to that of auditors or accountants appearing long after the event and trying to reconstruct the situation as it was supposed to have existed back in July.
One of the arguments that the Financial Secretary would have liked to use in July, which he used on Monday night, was that the Government would rather have acted through a jobs tax, a payroll tax, an employment tax, or whatever name it might have, than through raising value added tax. I do not fully follow their argument. It seems these days, as the Chancellor reminded the House a few days ago, that value added tax is a good deal less regressive than this kind of employment tax will be and is possibly less regressive than income tax. It used to be the other way round. Income tax was supposed to be progressive and all indirect taxes regressive. But times have changed. Everyone down to those on one-third of average earnings is paying personal tax at some of the highest starting rates in the Western world. For that reason the progressive nature of income tax has possibly been somewhat eroded. By contrast VAT, which does not fall on foods or on quite a lot of the household budget, is not as regressive as the other taxes, including this employment tax.
Therefore, I would not have accepted the Financial Secretary's arguments in July or August. When he tried to use them here and now in December the immediate implication, which was seized upon by a number of newspapers, was that he was talking about December, not July, and that in talking about December he was saying that VAT was not the tax to raise. Of course, he knew full well, and I suspect that the House recognised it, that no Minister can state for the Chancellor in advance what the Chancellor might be deciding, for all we know, at this moment. The likelihood is that he will include increases in direct taxes, value added tax and the excise taxes as well, as part of the attempt to shore up the edifice in steps which must now be

taken because of failure to take action last July. The arguments were relevant to the past, but when they were used in the present they were bound to be misjudged and misunderstood.
Our opposition to the Bill is not related to whether we would have preferred value added tax or income tax to be increased, or the other alternative tax increases that the Financial Secretary and the Minister of State have offered us throughout the debate. Our proposition is that if in July the Government had made firm and decisive cuts in public spending, not of £1,000 million, but of £2,000 million, had shown that they were going to get control of the financial situation, keep control of the gilt-edged market, and, therefore, of interest rates, thus keeping control of the public sector borrowing requirement and giving priority to financial stability, we never would have reached today's humiliating situation. Now there must be bigger spending cuts, which are at present being worked out by the Cabinet and the Treasury. They will be awkward and painful, and the Left-wing will find them indigestible. This situation need never have arisen.
We always said that if decisive action was not taken in time the Chancellor would lose control of the timing and would have to take action at the behest of other people in a more painful, clumsy and reluctant way than should have been the case with an orderly strategy which entailed keeping control over the economy and our finances. We have no hesitation in putting that forward as a consistent and strong argument which has been cruelly justified by the events now before us.

Mr. Eddie Loyden (Liverpool, Garston): It is quite true that the argument about public expenditure was whether the cuts should be phased or should be made in one fell swoop. Does the hon. Gentleman not agree that the net result would be an increase in unemployment? Views have been expressed on the Conservative Benches about the unacceptable level of unemployment. How can the hon. Gentleman square that with the public expenditure argument?

Mr. Howell: An increase in unemployment, yes, but not as great as the increase that will now take place. We


recognise that cuts in public expenditure are painful. No one has denied that. We said that to delay the cuts would be more painful. We now see that. People will be out of jobs, particularly in the private sector. They are being thrown out of jobs as a result of the private sector's finding it impossible to get going again, to invest, to borrow money to put in new equipment, to open new warehouses and to take on new hands. All these things are the pimples on the face of the body economic as a result of public expenditure's not being cut Because of these things more people will be out of jobs.
If one can be so callous—we are talking about human beings and jobs—one must say that it is a question of the net balance between the painful effects on the public sector of cuts made in time versus the beneficial effects of more favourable monetary and investment conditions that will lead to a pick-up in confidence. That is what we are looking for on both sides. We are longing to get out of this vicious spiral of falling confidence, poor performance, low investment and innovation and lack of competitiveness which lead to further balance of payments difficulties, further weakness in sterling and further inflation. We are longing to reverse that spiral. I am arguing, as my hon. Friends have argued again and again, that the kindest way, even though it looks tough in terms of preserving and creating new jobs, is to get control of the financial situation again, to put that first. All the other aims that we share—the desire to see everyone in good jobs, with job stability, an end to the threat to job security—will follow.
Those hon. Members who insist on putting the economic target of jobs first in the shortest term, in a zero time scale, are constantly having to retreat from that position and are constantly being forced to take measures, such as we shall see in the next week or two, which throw more people out of work.

Mr. Litterick: I have been listening intently to the hon. Gentleman's remarks. He tends to overstate his argument, giving the impression that there is something unique about the British situation and about the problem facing the Government. Does he not agree that the problems faced by this country, and by this

Government, are shared by virtually every developed country in the northern hemisphere? Does he not agree that the problem of mass unemployment is greater than, the same as, or a little less than ours in most of the developed countries? They all have similar problems of under-investment. They all have an apparent inability to stimulate what the hon. Gentleman called confidence so that investment takes place. The commonality of those problems must surely make the hon. Gentleman hesitate about emphasising that the only way the problem can be solved is by t he Government's acting unilaterally as though they lived in a vacuum. That imparts unreality to the hon. Gentleman's argument.

Mr. Howell: All politicians, particularly when we talk about economics and particularly when we look at the record of this country, should hesitate before emphasising anything too much. I share that view with the hon. Gentleman.
I am not sure that I can agree with the hon. Gentleman about the commonality of this problem. Of course, the movement of the world business cycle is decisive in this country as in our neighbouring European countries, the United States and Japan. That goes without question. The fact that the world recovery is faltering is serious for us as for every other country.
But we have to bear in mind the differences, which led last summer and the summer before to that appalling gap between our rate of inflation and that of our main competitor countries, which in turn led people to say that sterling had to be adjusted. That in turn forced on us the crisis arising from the depreciation of sterling, which in turn forced up internal costs and made it still more difficult for us to operate in this country. So our inflation rate has been worse, and on present trends as we move into the coming year—it gives me no joy to say it—although inflation may cease to fall in other countries it looks as though we shall once again ride on a higher level than our competitor countries.
Problems of investment, new equipment and new products are deep seated. There, too, we have obviously not been able to compete. As a result, we are one of the deficit countries, not one of the surplus countries. All the time we


go to the surplus countries. The Chancellor of the Exchequer tells them "You must cut your surplus in order to prevent the world recovery faltering even more." That has some validity, but the other side of the argument is that therefore we should do nothing about our deficit. We should do something about it. We, too, have a responsibility in the international community, a severe responsibility to bring our deficit under control so that we can move towards the mean and—who knows?—become a surplus country as well. That would be a very proud day.
I take the hon. Gentleman's point that we live in an international community and that what is happening on the international economic scene is relevant. But we can do much more than in the past to help ourselves and the international community get through the present world business cycle and see that this country comes out in a dignified rather than a humiliating way.
What worries my hon. Friends and many people outside the House is that at every point in the process the Government, by a mixture of misjudgment and good intentions, leading to the place to which all good intentions lead, and through failures of analysis, have constantly found themselves proclaiming the aim of maintaining employment, job creation and job security and yet pursuing measures which have led to job destruction. That is why I do not think that it is an overstatement to talk about the Bill as part of the Government's job destruction programme. It has been a most elaborate programme which would do credit to any manifesto-drafter or programme-maker.
I should like to list some of the items in that programme which have been rolled forward and have led inevitably, as this measure will, to more people being thrown out of work rather than more being kept in work. First, we must go back to the obvious fact, but one that is still worth commenting on, that we have record interest rates. Sometimes hon. Members, perhaps in any part of the House but certainly among those who are afficionados of high public expenditure, do not realise just how socially cruel really high interest rates are, how they cut into jobs and smash into the household

budget of the mortgage-payer, how bitter and difficult are the conditions that they create. At the levels that we have suffered in this country, they are an instrument not of benefit, ensuring that public expenditure can be financed at a high level, but of attack of the most insidious kind on the working people and their interests.
It behoves everyone who puts the interests of the working people first in every way to regard with great suspicion and detestation the kind of high interest rates to which we have been driven. The high interest rates— —

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): I am sure that the hon. Gentleman will not overlook that he must discuss only what is in the Bill.

Mr. Howell: I shall certainly take account of your ruling, Mr. Deputy Speaker. I was trying—and with your guidance, I should like to continue to try—to put the details of the Bill in the context in which they belong, but I appreciate that if the context becomes too large we lose sight of the details of the Bill, and I shall try to limit the context.
We have argued backwards and forwards throughout this debate as to what direct effect the measure will have on jobs. Evidence has been given in Select Committees that as many as 100,000 jobs could be affected. Ministers have clung, somewhat desperately at times, to their estimate of 10,000 jobs by the fourth quarter of next year. The truth is that the Government have no idea what the effect of the Bill will be because there are so many other factors involved. There are other threats to small businesses, the wealth tax—which is a wicked attack on working people and their jobs, and I do not understand the motives of those people who put it forward—and capital transfer tax—

Mr. Deputy Speaker: Order. Wherever the wealth tax may or may not be, it is not in the Bill.

Mr. Howell: I accept that point. Perhaps the fact that the context of my speech is becoming wider indicates that I have said enough about our objections to the measure and our reasons for opposing it. They are sound and solid reasons


that are related closely to the interests of working people and the private sector.
The tax is an attempt to shift on to the private sector the burdens that will eventually—and probably quite soon—have to be borne by the public sector, particularly the administration of the public sector. There is no shirking that. We have always thought, and still do, that the measure is an attempt to shirk it and to escape the realities that are rapidly catching up with the Government.
For those reasons, I strongly advise my hon. Friends to oppose the measure. We think that it is damaging to employment and that it has been overtaken by the events of the autumn and winter. It should be resisted in every possible way.

8.47 p.m.

Mr. John Wakeham: rose—

Mr. Deputy Speaker: >: Mr. Brotherton. I am sorry, I mean Mr. Wakeham.

Mr. Wakeham: I had hoped that the strenuous efforts that I have made to lose weight during the last few weeks had met with some success, but apparently they have not. Having received such a rebuke at the beginning of my remarks, I shall strive further—until Christmas—to try to make the difference between my form and that of my hon. Friend the Member for Louth (Mr. Brotherton) more readily appreciated by the Chair.
In advancing arguments on the reason why we should not give the Bill a Third Reading, I want to refer to the speech made by the Minister of State, Treasury, on Second Reading. The whole of the latter part of that speech concerned the fact that industry was likely to make substantially increased profits in the coming year. As a result, the Minister felt that industry could well afford to pay what has generally been accepted as a tax out of increased profit.
The Minister quoted from a report by a firm of stockbrokers, Phillips and Drew, which said:
Despite the current slow down in world economic growth and the worsening
outlook for consumer spending in the United Kingdom we still expect that there will be another significant advance in company profits next year. We are forecasting a 20 per cent. rise in industrial profits, 34 per cent. in financial profits and 25 per cent. increase in oil company's profits."—[Official Report, 6th December 1976; Vol. 922, c. 150.]

That was a very important part of the Minister's argument. Indeed, if it could be shown to be true. I should consider that he had made a very strong point in favour of his contention that industry should be able to pay a further contribution. However, if it can be shown that his case is not a good one, much of his argument falls by the wayside and makes his conclusions much less valid.
I tried to get hold of a copy of the report and was told by the stockbrokers that it would cost me £5. I do not know whether, because of the publicity given to the report by the Minister, the company decided to increase the price, but the fact that it cost £5 made me suspicious of its contents, and I was determined to get a copy. Not having £5, I had to resort to subterfuge to get a copy of the relevant part of the report.
The Minister quoted correctly the section printed in bold type in the report, but, no doubt because of his busy and onerous job, he failed to read the following paragraphs, which present a different picture from the bold statement of the Minister—which I do not challenge, but which should be read in the context of the information which follows it in the report.
The report says that industrial profits are likely to increase by about 20 per cent., but that 15 per cent. of the increase is accounted for by inflation. Thus, the increase in profits is reduced immediately to about 5 per cent.
It is accepted on both sides of the House that profits from manufacturing industry have fallen from about 15 per cent. in 1965 to 2 per cent. last year, so we are talking about a 5 per cent. increase on a base level of profits of 2 per cent. That sort of projection does not justify the Minister's saying
My point was that the profitability of industry next year will show a healthy increase as a result of many measures which have been introduced."—[Official Report, 6th December 1976; Vol. 922, c. 150.]
A 5 per cent. increase on 2 per cent. profits is not particularly healthy.
A number of interesting points are revealed if we look further at the report's projection of increased profits. The increase forecast by the stockbrokers is mainly an increase in the profits of overseas subsidiaries of United Kingdom


companies and not an increase in the profits of companies trading within the United Kingdom. The report refers specifically to a 6 per cent. increase in the growth of OECD countries, upon which it puts considerable store, and also refers to a 1 per cent. fall in demand in the United Kingdom.
The report also considers that part of the increased profits will arise as a result of local inflation overseas assisting the subsidiaries of United Kingdom companies, and that a substantial part of the increase in profitability of United Kingdom companies will result from the fall in the value of sterling.
I am afraid that I find the whole basis of the Minister's case, on which he commended the Bill to the House on Second Reading, to be extremely inaccurate. I am extremely unhappy that he should have been so selective in his quotations from Phillips and Drew, a firm of stockbrokers who have a high reputation for objective analysis. A more careful look at the report would have given him a more balanced picture. There is nothing in the report to support the contention that there is likely to be a real increase in United Kingdom profits in the coming year.
I would add that I also speak as a business man, and what I have said is much more in line with my experience in talking to the companies and clients with whom I deal. The increase in profits that will come to United Kingdom companies will come mainly from their overseas subsidiaries, largely as a result of the devaluation of the £sterling. That is a very bad case indeed on which to commend the Bill to the House. That is why I shall vote against it on Third Reading.

8.56 p.m.

Mr. Litterick: The proposal to impose a 2 per cent. surcharge on contributions is a deflationary measure. Few people would be able to assert confidently what its effects will be, although it is a habit of many hon. Members to be confident about things on which they have no basis for confidence. Its effect on employment is indeterminate. We have no way of telling whether this £1,000 million reduction in expenditure will increase unemployment at all, because there are

so many other factors at work. It is wholly interminate.
This measure will affect the consumer. There can be no doubt that this extra cost to employers will simply be passed on, price control policy or not. It will be passed on in the form of price increases, although I am certain that little or not attempt will be made to prove that this is happening. The regressive character of this proposal is evident for that reason. It will simply be passed on as prices and will most gravely and adversely affect the lowest income groups in society—those people who cannot avoid spending all of their income.
It seems peculiarly ironic, as the Minister said earlier, that the instrument by which this £1,000 million is being taken out of the economy should be the social security or national insurance system. I take the points he made earlier about this surcharge. But the fact is that the national insurance system is being made the vehicle for a tax—whether one calls it a payroll tax is neither here nor there—which is regressive in character. At the same time, the national insurance system proper is acting in a similar way in relation to the population at large, to the extent that, as the Government Actuary informed us today in his report, the National Insurance Fund is generating a very large surplus, the effect of which is precisely the same in character as the £1,000 million surcharge now proposed. The size of the current surplus in the National Insurance Fund is not far short of another £1,000 million. In fact it is £932 million, with the promise of yet another very large surplus next year.
What we are talking about is a difference between the amount of money being taken by the State from the population, be they workers or employers, and the value of services or benefits paid out by the State, this year and next year. I am sure that the House will be interested to be reminded, if not informed, that the same relationship has existed for many years vis-à-vis the National Insurance Fund. It has been persistently in surplus. I have simply jotted down the figures provided by the Actuary in this context. Taking the current year and next year, together with the previous three years' history of the National Insurance Fund, the total deflationary effect of the operation of the Fund, measured


in money terms, is £2,800 million. That is a very large attack on the consuming ability of the population at large. It is £2,800 million cumulative. The surcharge is simply a siphoning off of purchasing power.
Hon. Members have argued that we are simply using the mechanism of the Fund to siphon off purchasing power. I am pointing out that the national insurance system, as a social security system, is being used in the same way, and has been used in the same way for a number of years. Whether that was intended is neither here nor there. However, the size of the surplus seems to indicate either that there is a great deal of incompetence within the Civil Service, or that it is and was deliberate. I am persuaded to the latter view —that it is a deliberate intention that this year there should be a surplus of £932 million and that there was a deliberate intention last year that there should be a surplus of £637 million.
I address myself to the Government I have to point out that this is very much at odds with what some economic orthodoxies would suggest. It seems almost as though the Government were reacting to an earlier phase in the economic cycle. It seems to me and to many others that we have long since reached the stage in the style of capitalist decline and expansion at which we ought to be thinking in terms of reflation, and in fact we are still arguing over deflationary measures, cuts and the like, and this £1,000 million surcharge.
It seems that the Civil Service—the Treasury—is once again out of sync. It takes the Treasury a long time to react to a situation, and when it reacts it is reacting to the situation as it was and not the situation as it will be tomorrow—as it ought to be doing.
The economy is being hit hard by the operation of the social security system, that is the operation of the Fund and this surcharge together. The impact in terms of spending power is very severe. Whether the Government choose to call the thing a tax or something else is not important. What is important is the essential economic decision made to deflate when we should be doing the very opposite.
At the same time as this is being done, we discover that Defence departments are asking for more money—£517 million.

Dr. McDonald: Disgusting!

Mr. Litterick: If, in terms of the economic situation, my right hon. Friends can justify deliberately creating a surplus from the mechanism of the social security system in the National Insurance Fund, how in thunder can they, in terms of any logic, justify a further £517 million for defence? It does not make sense, taken together. It is almost a wilful contradiction by the Government themselves.
Another way of putting this matter, as a Socialist, would be that as a party of redistributors we are currently indulging in the most grotesque kind of redistribution imaginable. We are reducing the social services available and the moneys allocated to the provision of those services, while providing an increase in the very expenditure which, in my humble opinion at least, is so flagrantly inflationary—namely, military expenditure. I leave aside the question of commitment.

Mr. Deputy Speaker: Order. The hon. Gentleman will have heard me reminding an hon. Member a few minutes ago that it is only matters that are in the Bill which are relevant in this debate.

Mr. Litterick: I am grateful for those words of advice, Mr. Deputy Speaker. However, I have some advice to offer the Government. In their wisdom, they have decided that they must milk the population of this £1,000 million. I am in the odd position—it is very odd for me—of having to echo, at least to some extent, the words of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). There is at least a certain verbal dishonesty here in associating this tax—they call it a surcharge, at least—with the National Insurance Fund.
I gently suggest to my right hon. Friends that they could have been a little more explicit. This is not something on which I am prepared to go to the barricades, but as a matter of principle I am a believer that our people should know how much tax they pay. For that reason, I am no supporter of indirect taxation. I am a great believer in calling a tax a tax, and nothing else. I also believe that we should tell each individual how much he is paying in tax week by week, so that at least he will have half of the calculation he needs to make as a citizen—that is, he can judge, first, on the basis


of what he pays and, second, on the basis of what he gets in terms of service from the State.
Most citizens are aware that they have to purchase things collectively as citizens of a community, but we obfuscate and obscure the situation when we offer an indirect tax system, when we offer things called surcharges which are in fact taxes, and thus make it more difficult for the citizen to make an intelligent judgment of the Government's behaviour.
Although I sympathise with the Government's problem, that they are ill-advised people who apparently take at least half of an economic cycle to react to reality and therefore to this kind of advice, as a supporter of a Government who are at least tinged with Socialism—if they do not have Socialist pretensions, they are at least formally committed to Socialist objectives—and who have to live in a capitalist world in which capitalist priorities predominate, I should be more confident about this measure if the Government were more open about its purposes.
I am prepared to accept that the Government believe that reducing the public sector borrowing requirement is vital to the recovery of the British economy. I do not believe it, but I am prepared to accept that they sincerely believe it. But I wish that they would be more explicit on the question why they have exploited the National Insurance Fund in this way. I do not recollect hearing it said, and I should be more encouraged to hear it said. I should be more encouraged if the Government would assert more overtly Socialist priorities in the face of hostile pressures.
Lastly, I believe that the Government would help themselves if they were less immersed in the logic and priorities and peculiar incestuous mentality of the Treasury and spoke as if they were living in a much broader world than the British economy and therefore did not encourage those in the House and outside who would have our people believe that our economic problems are peculiarly and uniquely ours and are not experienced by anyone else. Those of us who know the world know that the problems we face are faced by practically every developed country.
Therefore, arguments about such apparently small issues as this should always be couched in terms which enable people to see clearly that this is a problem of world capitalism and that this £1,000 million is, in effect, tribute money which is being exacted from our people to placate those who are at present masters of that capitalist world.

9.11 p.m.

Mr. A. J. Beith: In this short debate I want to advance two reasons why I believe that the Government have chosen an unsatisfactory instrument and why the addition of this surcharge to the employer's contribution, will be harmful and ought not to be given the backing of a Third Reading in this House.
The first reason is that I want to see people employed, not paid by the State to be unemployed. It is possible to argue that we cannot know in precise terms the employment consequences of this measure. I accept that. However, I know that the employers with whom I deal in my rural constituency are increasingly perturbed at the additional cost of employing a man. The cost per employee is one of the disincentive factors to them in retaining or adding to their present labour force.
There are a number of reasons why this House has had to increase the cost per employee to the employer. Many welfare, industrial training, and other measures passed by this House unavoidably add to employer's costs. Now we are adding to the employer's costs a burden which we could have dealt with in other ways. For general economic management reasons, we are adding items which I regard as having a particularly serious effect in the whole delicate balance of employment. I think particularly of small firms and undertakings which have to consider whether it is worth keeping their present labour force or taking on more apprentices, bearing in mind the many costs and loss of time associated with apprenticeship. That is all added to the additional National Insurance Surcharge as part of the calculation.
Again and again employers in my constituency tell me that the additional costs of employing labour represent a serious disincentive to them. I should prefer to see us discouraging employers from


spending their money on imported machinery and expensive energy, rather than on labour. We have a pool of unused labour in this country. I do not want this kind of disincentive to be imposed on employers. Neither I nor the Minister can make a real calculation of what the total general employment consequences will be. But I am convinced that in areas such as mine, individual employers of one, two, three or four extra men will say "No. When this is added to the rest, we cannot afford it". It is on this marginal point that the surcharge will bear particularly heavily.
The second reason why I think that the House should not give a Third Reading to the Bill is that it has not been possible to deal with a particular area of general concern—the Churches and charities. Therefore, the Bill contains unqualified provisions which would place a particularly heavy burden on organisations which are not well placed to afford them.
Again, we have to relate this proposal to the context of the Churches' point of view on recent decisions on national insurance. The Churches were invited and encouraged by the Government to place the people they employ—clergy and lay employees—in an employed position under the National Insurance Scheme, not in a self-employed position. The Churches have had to pay the price for this. They sought to do it and have met the Government's request. Now they face a considerable extra burden. They were led, by previous taxation decisions, to assume that the Government recognised their special position of not being able to pass on additional costs in charges for services or anything of that kind.
Because of the way in which the Bill has been handled by the House and the procedural resolutions—the Ways and Means Resolution in particular—it has not been possible for right hon. and hon. Members to secure amendment of the Bill. Therefore, we are left with a Bill whose provisions, applied directly to the Churches and charities, will be harmful and may cause them to withdraw particular services.
The fact is that any charitable organisation with heavy labour costs, as most of them have, because they try to keep

down administrative costs and to use their money mainly for field workers, has to ask "Where do we find this 2 per cent.? Is there any alternative but to reduce the number of people we employ in order to find the money? "Churches and charities placed in that position will have no alternative but to reduce the level of services to the community which their professional employees give by reducing the number of those employees.
The House should not be contemplating the Bill without at least passing judgment on specific amendments relating to it. Since the House has not been able to do that, the Archbishop of Canterbury is justified in taking offence, not at the Prime Minister for failing to find time to see him, but at the fact that the House of Commons has been prevented from dealing with the matter. That is what makes this aspect of the Bill so unpalatable.
Employers in areas such as mine will think twice before adding to or even retaining their present labour forces. Churches and charities will be severely damaged by the Bill. For those reasons, we should not give it a Third Reading.

9.16 p.m.

Mr. Robert Kilroy-Silk: The Bill imposes a 2 per cent. surcharge on employers' national insurance contributions, which will raise £1,000 million. That amounts to an average of £1 per week tax on every worker in the country. I can see the attraction of the measure to the Government. It is an easy and quick way of collecting that sum—and it has gone through the House very quickly. It is also attractive because it can be sold as a tax on employers—no one seems to like employers these days—but in reality it is a tax upon work. It is a payroll tax that will make it more difficult to solve our employment problems.
At a time when we have 1½ million unemployed, it is remarkable that we should be asked to approve a measure which will not reduce employment and which, in the regions, will add to the total pool of unemployed.
Government spokesmen have given various estimates of the increased number of workers who will be unemployed as a result of this measure, but no one has any confidence in estimates from the


Treasury. If the Bill results in one extra man becoming unemployed, that is one man too many. If that man works on Merseyside it is certainly one too many. There is a serious unemployment situation on Merseyside. The area has the highest rate of male unemployment in the United Kingdom. It is far greater than in areas of Scotland or Wales. More people are unemployed on Merseyside than in the whole of Wales.
The measure will hit hardest the areas that can least afford extra burdens. The regions, where unemployment rates are already highest, will not be able to absorb or pass on the effect of this increase as will firms in London, the South-West or even the West Midlands. Firms in areas such as mine that are already struggling to maintain their present workforces will find that this burden is too great.
There are threats of many closures on Merseyside. For instance, in Skelmersdale, where the unemployment rate is 19·5 per cent. Courtaulds is to close and 1,000 jobs will be lost. A further 600 jobs are threatened in Aintree and Control Data and Albright and Wilson of Kirkby will announce redundancies in the next two weeks. Plessey and GEC in Liverpool are likely to announce redundancies as a result of a cut back in Post Office orders. This situation exists before employers have to face the additional burden of paying £1 per week per worker. Many of those workers will not be workers once the Bill becomes law. It is regrettable that my Government could not find a find a more selective and flexible means of raising the money they need.

Mr. Cyril Smith: I am intrigued by the hon. Gentleman's speech. Would he mind telling us how he voted on Monday night in the Second Reading debate and how he proposes to vote tonight, in view of his condemnation of the Bill?

Mr. Kilroy-Silk: The hon. Gentleman always was impatient. If he will just listen quietly he will get the answer to his question. I would have preferred the Government to find a more selective measure that would not have had such an impact on unemployment.
I accept that an increase in VAT would probably have had far more impact on unemployment than will this measure. I would have preferred the Government

to find a less blunt instrument that would not hit employment across the whole country irrespective of the needs and handicaps of specific regions such as Merseyside. I did not vote against the Bill on Monday night and I shall not vote against it tonight. [Interruption.] I do not know why my sincerity should be in dispute. The sincerity of the hon. Member for Rochdale (Mr. Smith) is not in dispute.
I am deeply concerned about employment in my constituency and in the country as a whole. I am perturbed about the effects which the measure will have on employment, and I am also profoundly concerned to keep my Government in office. I am far more concerned about the measures that would be enacted by the rabble sitting on the Opposition Benches if they were in Government. I have no inhibitions about supporting my Government on Monday and again tonight, although I do so regretfully and reluctantly.
I would prefer the introduction of other measures, perhaps concerning defence, which has not been cut back as much as many of us would like. Even more money is now being asked for defence. Had my hon. and right hon. Friends looked more closely at other choices, they could have been found, especially in defence. The Bill will hit hard at my constituents who are already severely pressed by the high level of unemployment.

9.22 p.m.

Mr. Robert Boscawen: The hon. Member for Birmingham, Selly Oak (Mr. Litterick) referred to a pertinent matter—the size of the surplus of the National Insurance Fund. Had he looked at the Government Actuary's report he would have seen the assumptions upon which the Government Actuary had been told by the Government to base his conclusions to arrive at a surplus. The assumptions were an average unemployment figure of 1¼ million and an average increase in annual earnings of 8 per cent. It is clear that if those rates produce that surplus the Government expect a substantial increase in the unemployment level during the coming 12 months.
I cannot believe that only 10,000 people are likely to be thrown out of


work by the Bill. That estimate bears no relation to reality. It is a figure plucked out of the blue to suit the debate and the argument. On previous occasions when the Government have predicted unemployment levels over the ensuing few months they have been wildly low in their estimates, and that is likely to happen on this occasion. That is the first reason why I hope we shall not give the Bill a Third Reading.
My second reason is that the surcharge is indiscriminate and takes no account of how well or ill an industry is doing. I represent an industry that is suffering severely in the present difficult recession and the difficulties of world trade generally—namely, the shoe manufacturing industry. It is a labour-intensive industry that is suffering from low-cost imports, especially from Iron Curtain countries. It is finding it extremely difficult to keep its head above water. But along come the Government and hit the industry just as hard as any other.
The Minister said that the Government considered the Bill to be the most suitable method of reducing the public sector borrowing requirement next year. Another reason for the Bill was that industry's profits were likely to increase substantially next year. The Minister is talking through his hat if he applies that reason to certain sections of industry and decides to hit them as hard as others. This is an indiscriminate measure that will hit the industries that are already down and struggling to survive in the present difficult circumstances.
My third reason for opposing Third Reading is that the suffering will be concentrated among those on day work who receive low wages as opposed to pieceworkers. The low-wage day workers in firms that are not particularly profitable at the moment will suffer most. In the main, those who are on piece-work can increase their productivity from time to time and improve their earnings. That option is not available to day workers. It is the day workers receiving low wages who will suffer most, and they are the people whom we need to help.
In my view I have put forward three solid reasons for the Bill being the wrong way of going about reducing the public sector borrowing requirement. As has happened many times in the past few

months, I have no doubt that if the Bill is given a Third Reading we shall be forced at a later stage to take measures to put right the mistakes that result from it.

9.27 p.m.

Mr. Loyden: I shall be brief, because I know that other Members want to speak. I wish to return to the point that was made by my hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk). In considering this measure our minds are bound to turn to the unemployment that now prevails in areas such as Merseyside.
My hon. Friend the Member for Ormskirk catalogued not only the present unemployment but the possible closures that Merseyside industry is facing. It must be borne in mind that my hon. Friends below the Gangway have been offering the Government alternative economic policies, especially industrial policies for the regions, over a prolonged period. No matter what the Government say about regional unemployment, especially on Merseyside, they have made no real and serious attempt to alleviate the problem. They have proceeded in the hope that in the immediate future there will be a betterment of the present situation.
The argument goes far beyond the questions posed by my hon. Friend the Member for Ormskirk. In addition to the catalogue that he arrayed before the House there are the difficulties at Shotton, the steelmaking industry in North Wales. We must bear in mind the effect that they will have upon the Birkenhead docks, which are largely reliant upon handling iron ore from the Shotton steelworks. There are also the difficulties faced by factories in my hon. Friend's constituency and in my constituency. Firms in the engineering sector and other sectors of industry have closed already, or are faced with closure. In addition, there are the problems facing the telecommunications industry.
Against that background, I am sure that no Minister will expect my hon. Friends below the Gangway fully to accept the Bill. It is a measure that could add to the already unacceptable level of unemployment in the regions. I have not yet made up my mind what to do on Third Reading. At the same time, some of the


measures proposed by the Opposition would be less acceptable than those now proposed by the Government.
I recall the point made by the Conservative Front Bench spokesman—the hon. Member for Guildford (Mr. Howell)—when he referred to the non-regressive nature of VAT. I remind him that VAT in that sense has no relationship at all to the income of the person paying it, and that therefore as a means of indirect taxation it is even less acceptable from my point of view than the Government's present proposals.
Our main concern has been expressed quite forcibly tonight by Labour Back Benchers. The Government must take into account the effect of their measures on the important question of employment. I did not join the Labour Party in order to see 1½million of our people unemployed, and I was not elected to this House to see it. I accept that world recession and other factors are involved, but when the Government take upon themselves the responsibility for introducing measures which create further unemployment, there can be no excuses for their behaviour.
Even at this late stage the Minister ought to think again on the effect that the measure will have on unemployment in this country.

9.32 p.m.

Mr. J. W. Rooker: Like my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) I shall await with interest the Minister's winding-up speech before deciding how I vote on Third Reading. I was in two minds as to how to vote on Second Reading on Monday. I spoke against the Ways and Means Resolution last week simply because of the effects on unemployment and the apparent lack of thought behind the Bill. I know that it was announced in July, but the reintroduction of what is in effect a tax on jobs—a payroll tax—had not been discussed al length on the Government side.
There has been a semblance of rushing through the measure in the last few days. There are good party political reasons why it should be rushed through before Christmas. I make no bones about that. We have a majority and we are entitled to use it as long as we still maintain it. Nevertheless, it was with reluctance

that I voted for the Bill on Second Reading. I almost abstained, but I thought it might be better to support the Government on Second Reading and then, if they did not come up with some good answers and good reasons for supporting the Bill on Third Reading, to abstain then.
The Opposition are not exactly fighting tooth and nail against the Bill as they were on Monday, as is shown by the Government majority of 16 earlier this evening, which is a little different from their majority of two on Monday.
We have heard a lot about the effect of the Bill on the Church of England. We have heard about meetings which may or may not have been arranged between the Prime Minister and the Archbishop of Canterbury. I understand that the financial effect of the Bill on the Church of England is £350,000. That means that the Church of England must have a payroll of £17½million, which is minuscule in relation to the size of the Church. I have every confidence that the Church will be able to drum up another £350,000. I mention it only because examples have been given of the effect of the measure on the Church.
We have also heard a good deal about charities, but there are charities and charities. There are some quite legitimate charities doing very good work, and I should be the first to support any measures the Government can take in the next few months to exempt certain charities from the full effects of the Bill.
There are certain regimental associations which are registered with the Charity Commissioners. There is one in the West Midlands. These associations deal with money donated for prisoners of war in the last war. The funds are growing year by year, but the associations are not spending money in order to seek out former prisoners of war who may be in distress. The money is not being used by these charitable institutions for the purpose for which the money was donated.
I do not want to see the money go in tax. I should prefer to see it used for the purposes for which it was donated originally. I am in correspondence with the Charity Commissioners with regard to the misuse of funds by a large regimental association in the West Midlands. Funds


are being used for officers' functions and for the purpose of meeting expenses, and so on. These are somewhat beyond the ambit of the charity as approved by the Charity Commissioners when setting it up.
Although there are some charities in one category and some in the other, I would not wish to tar all the charities with the same brush in terms of the way in which they will be affected. I support relaxations for many of the worthy charities, and the Government have given half a commitment that they will examine the situation before tax is collected.
I wish to examine the way in which the Bill will affect local authorities. I understand that the cost effect of the Bill will involve a figure of £140 million initially and £145 million in August, less a figure for rate support grant of £90 million. That will mean that the rate burden, following these provisions, will increase by nearly £60 million. That is a large whack to be put on ratepayers, and it could have been avoided bearing in mind the fact that in any case rates will increase next year.
The Labour Front Bench occupants know that I put my vote where my mouth is, and I am prepared to cause the Government to be defeated in respect of public expenditure cuts. But when we consider the alternative policy, involving a figure of £1,000 million, we know from where the Opposition would obtain that money. We have heard Opposition suggestions for cuts in the discussions on the Social Security (Miscellaneous Provisions) Bill and on the Second Reading of this Bill. The Opposition policy would mean increases in school meal costs and the taxing of sickness benefits for those who are unable to work. These suggestions were advanced by Conservative Members. They would cut food subsidies far more than the Labour Government intend to cut them—and I do not excuse the Labour Government entirely on that score.
We face a situation in which we have tax increases as opposed to public expenditure cuts. So far as I am concerned, the net result is the same. Conservative spokesmen roam the country screaming for public expenditure cuts, and yet they oppose this measure. Why do they take that view? They do so because this is not their kind of cut. Therefore, on

balance I am inclined to support the Government. The alternative, if we were to defeat the Government on this measure, would be to have the IMF coming down on us like a ton of bricks.Labour Weekly highlighted the situation recently by citing the secret discussions with civil servants and the suggestion of £5,000 million public expenditure cuts—

Mr. David Howell: I am sure the hon. Gentleman is aware that that report was a complete fabrication. I have denied it publicly, both outside and in the House. I hone that the hon. Gentleman will respect that denial.

Mr. Rooker: The report inLabour Weeklyquoted the hon. Gentleman as seeking £5.000 million in cuts. He has denied that. Perhaps he wants cuts of £6,000 million or £7,000 million. The hon. Gentleman and his cronies are on record as saying—

Mr. Deputy Speaker: I remind the hon. Member that it is only what is recorded in the Bill that is under consideration.

Mr. Rooker: The Conservative Opposition are on record about these matters in discussions on the Bill. They have made these points during debates on the Ways and Means Resolution, on the Money Resolution and on Second Reading. They oppose this Bill and have voted against it. The Bill does not comprise their kind of cut.
The Conservatives have put forward alternatives—and they are alternatives which I would not tolerate in any circumstances from a Labour Government. The Government will bring forward a measure to increase charges in the National Health Service. and in no circumstances will I support that move—[Interruption.] The hon. Member for Rochdale (Mr. Smith) can have it on the record that when the time comes I shall not support increased NHS charges. We face the alternative of Left-wing cuts or Right-wing cuts. That is the choice. We on the Government Benches below the Gangway have an alternative strategy, but the Government will not put it into operation.
We know the kind of cuts sought by the Conservative Opposition. The Rightwing Fascists among the Opposition


would wish to inflict cuts on the poor, the needy and the sick. In no circumstances would I be prepared to join them in defeating the Government on this Bill.

9.40 p.m.

Mr. David Mitchell: The Preamble to the Bill states that this House has
freely and voluntarily resolved to give and grant this surcharge".
That phrase always sounded rather quaint to me, but it sounds positively bizarre after the way in which this measure has been railroaded through the House without any time being given for us to consult our constituents, and without our having any opportunity to examine the situation facing Churches and charities such as Dr. Barnardo's Homes and Save the Children. The Bill has been rushed through, with its Second Reading on Monday and Third Reading on Wednesday. That is a disgrace, and the Government should be thoroughly ashamed of the way they have behaved.
We are opposed to this measure for four reasons. In some of the reasons I expect that I shall carry with me some Labour Members as well as my hon. Friends. First, it is an abuse of the National Insurance Fund and a perversion of the Beveridge principles. We had a debate on that earlier today, and I shall not go into it again, except to say that my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) dealt with it very well. Secondly, the measure undermines the whole of the Chancellor's stated policies. If he has any credibility left it is undermined by the Bill. Thirdly, the measure will have disastrous effects on production and small businesses. Fourthly, it is a charter for unemployment by a Government of unemployables.
Turning to the battered remains of the Chancellor's economic policies. I point out that we have been told repeatedly that the Government want to see the release of resources for industry. We were told in the Spring Budget that the Government have limited the demands of the public sector in order to make room for industrial expansion. I could produce Hansard quotes by the shoal about the central economic policy of the Government being to release resources for industrial expansion. Yet here they are taking £1,000 million out of industry—

and out of that part of industry which should be expanded. When hon. Members consider the irrelevance of that they will have considerable cause for concern about the way in which the Chancellor has behaved.
Then there is the damage to industry. We all know that industry needs a partnership of skilled men, motivated management, and investment. Without these three things there would be no jobs and no production, and British industry could not keep on its feet. Skilled men cannot do it on their own. There must be motivated management, but that is taxed sick by the present Government.
Yesterday, in my constituency, I opened a factory which produces automotive equipment. This can increase productivity seven times over in relation to the number of lathe and similar operations in a factory. It is said that Britain is the sick man of Europe. We may well ask why. I can tell the House why. It is because we have too little investment behind each worker in industry. It is not because of the trade unions, and it is not because we are lazy or that our workers are overpaid. It is because behind each man there is less capital equipment than there is behind equivalent workers in the countries of our European competitors. Yet today the House is being asked to vote to take money away from industry.
This money should be invested in working capital in order to bring about an expansion and modernisation of equipment in British industry. The worst-hit are the small businesses. They are not large businesses writ small; they are a different animal altogether. They cannot go to the Stock Exchange for extra working capital. They have to rely on ploughing back the surplus from the previous year's trading. That surplus will be eroded by millions of pounds by the Bill.
I estimate—the Government have not denied this figure—that £202 million will come out of the small-business sector directly because of the Bill. That is in addition to the high cost of bank borrowing—about 17 per cent. or 18 per cent. for small firms. It is in addition to problems of cash flow which are associated with a high and increasing rate of inflation. It is also in addition to the highest


number of bankruptcies in the small business sector since figures were first kept in 1914.
I am glad to see that the Minister who is responsible for small firms has come into the Chamber. We have not seen him once throughout the debate on this Bill—a Bill which will affect small businesses very much. It takes working capital out of them and will reduce their ability to compete, to modernise and to employ.
How many small firms does the Financial Secretary think will go bankrupt as a result of his activities today? I suspect that he neither knows nor cares, and that he has made no inquiries to that end.
The third reason we oppose the Bill is unemployment. We are entitled to ask where the "Minister for Unemployment" is. This is a measure which he has admitted will add about 100,000 to the number of unemployed, yet he is not here. We have had conflicting evidence about the extent to which unemployment will increase. The Chancellor said that it would go up by 10,000, but the Deputy Chief Economic Adviser to the Treasury said that the £2,000 million of economies promised in July would lead to between 150,000 and 160,000 more people being unemployed. He said that the calculation was based upon conventional Treasury arithmetic. We have before us £1,000 million of those cuts. Therefore, on straight mathematics, that would mean 75,000 to 80.000 more unemployed as a result of voting for the Bill tonight.
We must decide whether to believe the Chancellor and his 10,000 or the conventional Treasury arithmetic of 75,000. The latter is more likely to be accurate than is the political arithmetic of the Chancellor. He is more concerned with the politics of how many Back Benchers he can persuade to go into the Lobby.
I am one of those Members on both sides of the House who share the view that unemployment is a disaster and that it should be avoided at every opportunity. For six years I was a member of the Transport and General Workers Union. I was younger then and at a more impressionable age. I remember the way in which, during the inter-war years, unemployment had bitten deep into the hearts, souls and minds of many trade unionists, particularly the older

ones. We must do what we can to avoid a recurrence of that situation.
The Government progressively promised that if we did this or that they would get the unemployment figures down. They said that if we accepted the social contract, unemployment would progressively reduce. The reality is that it has gone up and up. Only yesterday, the Government Actuary's Report indicated a level of unemployment of 1,400,000 next year. I wonder how much higher it will prove to be.
The hon. Member for Birmingham, Selly Oak (Mr. Litterick) said that there was the same unemployment problem in every capitalist country. That is not so. The latest figures for unemployment percentages that I have are those given to the House on 2nd August, relating to the first quarter of 1976. They show that the unemployment rate in the United Kingdom was 6·2 per cent., whereas in Italy it was 3·6 per cent., France 4·8 per cent., Germany 4 per cent. and Sweden 1·6 per cent. It is not something that equally affects each capitalist country. In fact, the more Socialist the countries are the more unemployment they have. That is one of the factors that we should certainly take into account.
The House should reject the Bill tonight, as a betrayal of the Chancellor's own strategy and of manufacturing industry. We should reject it as a betrayal of investment and small business, of the unemployed and the many more who will become unemployed if it is passed. The decision will rest with hon. Members in a few moments' time. The Bill is also a betrayal of the electorate. On those grounds I urge all hon. Members to join us in the Lobby in defeating the Bill.

9.52 p.m.

Mr. Robert Sheldon: I should start by saying something about the reasons for the introduction of the Bill at this time. The most important aspect concerns the inconvenience to employers. If we had delayed the Bill any longer the printing of tables would not have been done. The employers would have received very much later notification about the extent of the deductions they are obliged to make, and the programme of administrative changes, which are scheduled to fit in with the operation of the National


Insurance Scheme, could not have been met.
I know that some hon. Members do not consider this an important matter. In fact, one Opposition Member said that small businesses were not the most important aspect. I go along with what the hon. Member for Basingstoke (Mr. Mitchell) said and accept that this is an important matter for small busineses and, indeed, all businesses. Their convenience needs to be studied as well.
The final reason for the late arrival of the Bill, and our inability to discuss it for as long as we would have wished was the late opening of the new Session. I remind the House that an attempt was made through the usual channels to satisfy the Opposition by making various alternative suggestions with regard to timing. There was the possibility of next week, but for one reason or another that was not convenient and was not accepted.
My hon. Friends the Members for Ormskirk (Mr. Kilroy-Silk), Birmingham, Perry Barr (Mr. Rooker) and others talked about this being a tax on employment. That suggestion was echoed in other parts of the House. I should make clear just what we are taxing. Hon. Members wondered whether it was a tax or a surcharge. To me it is a surcharge for the purpose of collection, but clearly it is a tax as well. I should not wish to mislead the House on that.
The tax will be 2 per cent. on the national insurance contributions, but the question which then arises is "On whom will it bite?" This is a more complex matter than might be supposed.
Where the tax bites depends on whether its effects are fed through into prices, whether there are reductions in the profits of the organisation concerned, or whether there are improvements in efficiency, leading to higher levels of unemployment. Our view is that in the end the tax will work through in prices, in the same way as VAT does. The advantage of that is that the effect tends to be somewhat more delayed, but there are one or two consequences. First, because it takes longer, the price increase 12 months after the introduction of the tax will be considerably less than it would have been if we had introduced other forms of indirect taxation.
I agree with my hon. Friend the Member for Liverpool, Garston (Mr. Loyden) that any increase, however small, is to much. But we must consider the alternatives, which include those that the Conservatives might choose. The Conservatives' objection is that the public expenditure cuts that we have proposed are too small. The tax increases that we propose do not represent the way in which the Conservatives would prefer to handle the matter. They would prefer extra public expenditure cuts, with a certain amount of overkill.
We have had great difficulty in persuading the Opposition to tell us the figures they have in mind. My hon. Friend the Member for Perry Barr mentioned the figures they had in mind. We know that such figures exist. Now and again it looks as though the Conservatives will pull aside the veil and let us into their secret, but they always fail to do so. We know, however, that they would go for a overkill—even if it meant much higher levels of unemployment—and be on the safe side. as they would put it. Although we understand that the public sector borrowing requirement must be cut, because of the difficulties in financing it, we are not anxious to do more than we believe to be necessary to undertake that financing and make sure that it is in line with our general economic strategy.

Mr. Nott: All that we suggested, as I said on Second Reading, is that we would have made the extra £1,000 million cut in Government expenditure in July, whereas the Government will make them next week. Will the Minister repeat the point he made with great clarity the other day—that he thinks that this is an infinitely better tax than VAT and that if additional revenue needs to be raised it will be raised in this way rather than by VAT?

Mr. Sheldon: Before letting the hon. Gentleman off the first hook, we must bear in mind that he has given a very interesting figure. We hear that it is not the £2 billion that all the argument has been about it is a much higher figure. Just before he sat down in the Second Reading debate, the hon. Gentleman said that he would inform the House what cuts he had in mind. Then he got cold feet and sat down without any disclosure.
The hon. Gentleman has given the House new information, and I am entitled to make something of it before answering his question. Tories now say that a £2 billion cut was all that they required. That is massive new information, and the House will look forward to hearing it confirmed.
I made quite clear on several occasions that the slow effect on consumer prices that will be caused by this tax is of great value with the kind of social contract which we shall continue to have. I know that the right hon. and learned Member for Surrey, East (Sir G. Howe) finds the social contract amusing but it is a fact of British political life. Many of my hon. Friends do not find it amusing and believe that it is a fundamental factor in what we are trying to give the country, in reducing levels of inflation, and in achieving industrial harmony which the Tories never attempted and were certainly never successful in achieving.
Alternatives to this type of tax are VAT and other forms of indirect taxation. The Tories would have chosen massive deflation through public expenditure cuts. That has to be the best

reason for voting for this Bill tonight. The kind of public expenditure savings that the Tories require would produce chaos industrially and economically. The aims of the Bill are clear. They are to reduce the level of public sector borrowing requirement while raising prices in as modest a way as possible, by having a low rate and broad base, and while having the unemployment consequence as low as we can obtain by any means available to us. We can obtain revenue and reduce the public sector borrowing requirement in the way that I have indicated. The choices are not easy but this is the best one available to us. I ask the House to give the Bill Third Reading.

The Chief Secretary to the Treasury, Mr. Joel Barnett, by Her Majesty's Command, acquainted the House, That Her Majesty, having been informed of the purport of the Bill. gives Her Consent, as far as Her Majesty's interest is concerned, That the House may do therein as they shall think fit.

Question put, That the Bill be now read the Third time:—

The House divided: Ayes 244, Noes 233.

Division No.19.]
AYES
[10.2 p.m.


Abse,Leo
Cook, Robin F. (Edin C)
Fletcher, Ted (Darlington)


Allaun, Frank
Corbett, Robin
Ford, Ben


Anderson, Donald
Cowans, Harry
Forrester, John


Archer, Peter
Cox, Thomas (Tooting)
Fowler, Gerald (The Wrekin)


Armstrong, Ernest
Craigen, Jim (Maryhill)
Freeson, Reginald


Atkins, Ronald (Preston N)
Crawshaw, Richard
Garrett, John (Norwich S)


Atkinson, Norman
Cronin, John
Garrett, W. E. (Wallsend)


Bagier, Gordon A. T.
Crowther, Stan (Rotherham)
George, Bruce


Barnett, Guy (Greenwich)
Cryer, Bob
Gilbert, Dr John


Barnett Rt Hon Joel (Heywood)
Cunningham, G. (Islington S)
Golding, John


Bates, Alf
Davidson, Arthur
Gould, Bryan


Benn, Rt Hon Anthony Wedgwood
Davies, Bryan (Enfield N)
Gourlay, Harry


Bennett, Andrew(Stockport N)
Davies, Denzil (Lianelli)
Graham, Ted


Bidwell, Sydney
Davies, Ifor (Gower)
Grocott, Bruce


Bishop, E. S.
Davis, Clinton (Hackney C)
Hamilton, James (Bothwell)


Blenkinsop, Arthur
Deakins, Eric
Hardy, Peter


Boardman, H
Dean, Joseph (Leeds West)
Harper, Joseph


Booth, Rt Hon Albert
Dell, Rt Hon Edmund
Harrison, Walter (Wakefield)


Bottomley, Rt Hon Arthur
Doig, Peter
Hart, Rt Hon Judith


Boyden, James (Bish Auck)
Dormand, J. D.
Hatton, Frank


Bradley, Tom
Douglas-Mann, Bruce
Healey, Rt Hon Denis


Bray, Dr Jeremy
Duffy, A. E. P.
Heffer, Eric S.


Brown, Hugh D. (Provan)
Dunn, James A.
Hooley, Frank


Buchan, Norman
Dunnett, Jack
Horam, John


Buchanan, Richard
Eadie, Alex
Hoyle, Doug (Nelson)


Butler, Mrs Joyce (Wood Green)
Edge, Geoff
Huckfield, Les


Callaghan, Jim (Middleton &amp; P)
Edwards, Robert (Wolv SE)
Hughes, Rt Hon C. (Anglesey)


Campbell, Ian
Ellis, John (Brigg &amp; Scun)
Hughes, Robert (Aberdeen N)


Canavan, Dennis
English, Michael
Hughes, Roy (Newport)


Carmichael, Neil
Ennals, David
Irvine, Rt Hon Sir A. (Edge Hill)


Cartwright, John
Evans, Fred (Caerphilly)
Irving, Rt Hon S. (Dartford)


Castle, Rt Hon Barbara
Evans, Ioan (Aberdare)
Jackson, Colin (Brighouse)


Clemitson, Ivor
Ewing, Harry (Stirling)
Janner, Greville


Cocks, Rt Hon Michael
Faulds, Andrew
Jay, Rt Hon Douglas


Cohen, Stanley
Fernyhough, Rt Hon E.
Jeger, Mrs Lena


Coleman, Donald
Fitch, Alan (Wigan)
Jenkins, Hugh (Putney)


Colquhoun, Ms Maureen
Flannery, Martin
John, Brynmor


Conlan, Bernard
Fletcher, L. R. (Ilkeston)
Johnson, James (Hull West)




Johnson, Walter (Derby S)
Morris, Charles R. (Openshaw)
Spearing, Nigel


Jones, Alec (Rhondda)
Morris, Rt Hon J. (Aberavon)
Spriggs, Leslie


Jones, Barry (East Flint)
Moyle, Roland
Stallard, A. W.


Jones, Dan (Burnley)
Murray, Rt Hon Ronald King
Stewart, Rt Hon M. (Fulham)


Judd, Frank
Newens, Stanley
Stoddart, David


Kaufman, Gerald
Noble, Mike
Stott, Roger


Kilroy-Silk, Robert
Oakes, Gordon
Strang, Gavin


Kinnock, Neil
Ogden, Eric
Strauss, Rt Hon G. R.


Lambie, David
O'Halloran, Michael
Summerskill, Hon Or Shirley


Lamborn, Harry
Orme, Rt Hon Stanley
Taylor, Mrs Ann (Bolton W)


Lamond, James
Ovenden, John
Thomas, Mike (Newcastle E)


Latham, Arthur (Paddington)
Padley, Walter
Thomas, Ron (Bristol NW)


Leadbitter, Ted
Palmer, Arthur
Tierney, Sydney


Lee, John
Park, George
Tinn, James


Lestor, Miss Joan (Eton &amp; Slough)
Parker, John
Tomlinson, John


Lewis, Ron (Carlisle)
Parry, Robert
Torney, Tom


Lipton, Marcus
Pendry, Tom
Urwin, T. W.


Litterick, Tom
Perry, Ernest
Varley, Rt Hon Eric G.


Loyden, Eddie
Phipps, Dr Colin
Walden, Brian (B'ham L'dyw'd)


Luard, Evan
Price, C. (Lewisham W)
Walker, Harold (Doncaster)


Lyon, Alexander (York)
Price, William (Rugby)
Walker, Terry (Kingswood)


Mabon, Dr J. Dickson
Rees, Rt Hon Merlyn (Leeds S)
Ward, Michael


McCartney, Hugh
Roberts, Albert (Normanton)
Watkins, David


McDonald, Dr Oonagh
Roberts, Gwilym (Cannock)
Watkinson, John


McElhone, Frank
Robinson, Geoffrey
Weetch, Ken


MacFarquhar, Roderick
Roderick, Caerwyn
Weitzman, David


McGuire, Michael (Ince)
Rodgers, George (Chorley)
Wellbeloved, James


MacKenzie, Gregor
Rooker, J. W.
Whitlock, William


Mackintosh, John P.
Rose, Paul B.
Willey, Rt Hon Frederick


Maclennan, Robert
Ross, Rt Hon W. (Kilmarnock)
Williams, Alan (Swansea W)


Madden, Max
Rowlands, Ted
Williams, Alan Lee (Hornch'ch)


Magee, Bryan
Ryman, John
Williams, Rt Hon Shirley (Hertford)


Maguire, Frank (Fermanagh)
Sandelson, Neville
Williams, Sir Thomas (Warrington)


Mallalieu, J. P. W.
Sedgemore, Brian
Wilson, Alexander (Hamilton)


Marks, Kenneth
Selby, Harry
Wilson, William (Coventry SE)


Marquand, David
Shaw, Arnold (Ilford South)
Wise, Mrs Audrey


Marshall, Dr Edmund (Goole)
Sheldon, Robert (Ashton-u-Lyne)
Woodall, Alec


Marshall, Jim (Leicester S)
Shore, Rt Hon Peter
Woof, Robert


Maynard, Miss Joan
Short, Mrs Renée (Wolv NE)
Wrigglesworth, Ian


Meacher, Michael
Silkin, Rt Hon John (Deptford)
Young, David (Bolton E)


Mikardo, Ian
Silkin, Rt Hon S. C. (Dulwich)



Millan, Rt Hon Bruce
Silverman, Julius
TELLERS FOR THE AYES:


Miller, Dr M. S. (E Kilbride)
Skinner, Dennis
Mr. Frank R. White and


Miller, Mrs Millie (Ilford N)
Small, William
Mr. Joseph Ashton.


Moonman, Eric
Snape, Peter





NOES


Adley, Robert
Cope, John
Glyn, Dr Alan


Aitken, Jonathan
Cormack, Patrick
Godber, Rt Hon Joseph


Alison, Michael
Corrie, John
Goodlad, Alastair


Amery, Rt Hon Julian
Costain, A. P.
Gorst, John


Arnold, Tom
Craig, Rt Hon W. (Belfast E)
Gow, Ian (Eastbourne)


Atkins, Rt Hon H. (Spelthorne)
Crawford, Douglas
Gower, Sir Raymond (Barry)


Awdry, Daniel
Crowder, F. P.
Grant, Anthony (Harrow C)


Bain, Mrs Margaret
Dean, Paul (N Somerset)
Gray, Hamish


Baker, Kenneth
Dodsworth, Geoffrey
Griffiths, Eldon


Banks, Robert
Douglas-Hamilton, Lord James
Grimond, Rt Hon J.


Beith, A. J.
Drayson, Burnaby
Grist, Ian


Bell, Ronald
du Cann, Rt Hon Edward
Grylls, Michael


Bennett, Dr Reginald (Fareham)
Durant, Tony
Hall-Davis, A. G. F.


Benyon, W.
Eden, Rt Hon Sir John
Hamilton, Michael (Salisbury)


Berry, Hon Anthony
Edwards, Nicholas (Pembroke)
Hampson, Dr Keith


Biggs-Davison, John
Elliott, Sir William
Hannam, John


Blaker, Peter
Emery, Peter
Harvie Anderson, Rt Hon Miss


Body, Richard
Ewing, Mrs Winifred (Moray)
Hastings, Stephen


Boscawen, Hon Robert
Eyre, Reginald
Havers, Sir Michael


Bottomley, Peter
Fairbairn, Nicholas
Hayhoe, Barney


Bowden, A. (Brighton, Kemptown)
Fairgrieve, Russell
Henderson, Douglas


Boyson, Dr Rhodes (Brent)
Farr, John
Hicks, Robert


Braine, Sir Bernard
Finsberg, Geoffrey
Higgins, Terence L.


Brittan, Leon
Fisher, Sir Nigel
Hodgson, Robin


Brocklebank-Fowler, C.
Fletcher, Alex (Edinburgh N)
Holland, Philip


Brotherton, Michael
Fletcher-Cooke, Charles
Hooson, Emlyn


Brown, Sir Edward (Bath)
Fookes, Miss Janet
Hordern, Peter


Bryan, Sir Paul
Forman, Nigel
Howe, Rt Hon Sir Geoffrey


Budgen, Nick
Fowler, Norman (Sutton C'f'd)
Howell, David (Guildford)


Bulmer, Esmond
Fox, Marcus
Howells, Geraint (Cardigan)


Butler, Adam (Bosworth)
Freud, Clement
Hunt, David (Werral)


Chalker, Mrs Lynda
Fry, Peter
Hurd, Douglas


Churchill, W. S.
Galbraith, Hon T. G. D.
Hutchison, Michael Clark


Clark, Alan (Plymouth, Sutton)
Gardiner, George (Reigate)
James, David


Clark, William (Croydon S)
Gardner, Edward (S Fylde)
James, R. Rhodes (Cambridge)


Clegg, Walter
Gilmour, Rt Hon Ian (Chesham)
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)







Jessel, Toby
More, Jasper (Ludlow)
Smith, Dudley (Warwick)


Johnson Smith, G. (E Grinstead)
Morgan, Geraint
Speed, Keith


Johnston, Russell (Inverness)
Morgan-Giles, Rear-Admiral
Spence, John


Jones, Arthur (Daventry)
Morris, Michael (Northampton S)
Spicer, Michael (S Worcester)


Jopling, Michael
Morrison, Hon Peter (Chester)
Sproat, Iain


Kershaw, Anthony
Mudd, David
Stainton, Keith


Kilfedder, James
Nelson, Anthony
Stanbrook, Ivor


Kimball, Marcus
Neubert, Michael
Steel, David (Roxburgh)


King, Tom (Bridgwater)
Nott, John
Steen, Anthony (Wavertree)


Kitson, Sir Timothy
Onslow, Cranley
Stewart, Donald (Western Isles)


Knight, Mrs Jill
Oppenheim, Mrs Sally
Stewart, Ian (Hitchin)


Knox, David
Page, John (Harrow West)
Stokes, John


Lamont, Norman
Page, Rt Hon R. Graham (Crosby)
stradling Thomas, J.


Langford-Holt, Sir John
Page, Richard (Workington)
Tapsell, Peter


Latham, Michael (Melton)
Parkinson, Cecil
Taylor, R. (Croydon NW)


Lawrence, Ivan
Pattie, Geoffrey
Taylor, Teddy (Cathcart)


Le Marchant. Spencer
Penhaligon, David
Tebbit, Norman


Lester, Jim (Beeston)
Percival, Ian
Thomas, Rt Hon P. (Hendon S)


Lewis, Kenneth (Rutland)
Price, David (Eastleigh)
Thompson, George


Lloyd, Ian
Pym, Rt Hon Francis
Townsend, Cyril D


Loveridge, John
Raison, Timothy
Trotter, Neville


Luce, Richard
Rathbone, Tim
van Straubenzee, W. R.


McAdden, Sir Stephen
Rees-Davies, W. R.
Viggers, Peter


MacCormick, Iain
Reid, George
Wainwright, Richard (Colne V)


McCrindle, Robert
Renton, Rt Hon Sir D. (Hunts)
Wakeham, John


Macfarlane, Neil
Renton, Tim (Mid-Sussex)
Walder, David (Clitheroe)


MacGregor, John
Ridley, Hon Nicholas
Wall, Patrick


Macmillan, Rt Hon M. (Farnham)
Ridsdale, Julian
Walters, Dennis


Madel, David
Rifkind, Malcolm
Warren, Kenneth


Marshall, Michael (Arundel)
Roberts, Wyn (Conway)
Watt, Hamish


Marten, Neil
Rodgers, Sir John (Sevenoaks)
Weatherill, Bernard


Mates, Michael
Ross, Stephen (Isle of Wight)
Wells, John


Mawby, Ray
Rossi, Hugh (Hornsey)
Welsh, Andrew


Maxwell-Hyslop, Robin
Rost, Peter (SE Derbyshire)
Wiggin, Jerry


Mayhew, Patrick
Sainsbury, Tim
Wigley, Dafydd


Meyer, Sir Anthony
St. John-Stevas, Norman
Wilson, Gordon (Dundee E)


Miller, Hal (Bromsgrove)
Shelton, William (Streatham)
Winterton, Nicholas


Mills, Peter
Shepherd, Colin
Young, Sir G. (Ealing, Acton)


Miscampbell, Norman
Shersby, Michael
Younger, Hon George


Mitchell, David (Basingstoke)
Silvester, Fred



Moate, Roger
Sims, Roger
TELLERS FOR THE NOES:


Monro, Hector
Skeet, T. H. H.
Mr. Nigel Lawson and


Montgomery, Fergus
Smith, Cyril (Rochdale)
Mr. Michael Roberts.


Question accordingly agreed to.


Bill read the Third time, and passed.

TAMESIDE (HOUSE OF LORDS JUDGMENT)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Coleman.]

10.19 p.m.

Mr. Christopher Price: The subject that I wish to raise concerns the effect of the House of Lords decision about the Tameside case and the meaning of Section 68 of the Education Act 1944. Section 68 provides:
If the Minister is satisfied, either on complaint by any person or otherwise, that any local education authority or the managers or governors of any county or voluntary school have acted or are proposing to act unreasonably with respect to the exercise of any power conferred or the performance of any duty imposed by or under this Act, he may, notwithstanding any enactment rendering the exercise of the power or the performance of the duty contingent upon the opinion of the authority or of the managers or governors, give such directions as to the exercise of the power or the performance of the duty as appear to him to be expedient.
I and a number of my hon. Friends feel that the House of Lords decision on Tameside was wrong, misconceived and completely inaccurate.
In saying that, I rely on Mr. Speaker Selwyn Lloyd's statement on 4th December 1973:
It can be argued that a judge has made a mistake, that he was wrong, and the reasons for those contentions can be given, within certain limits."—[0fficial Report, 4th December 1973; Vol. 865, c. 1092.]
I intend in a slight preamble to give certain of those reasons within those proper limits which were laid down. I shall adduce in my case two quotations from Lord Devlin, who wrote an article in The Times. It might put the criticisms that I am making in context as not coming from a small group of Labour Members, but as having a certain weight in the country at large.
Lord Devlin said:
Another criticism is hard they try
—he said that they try—
cannot sec the problem in an administrative light.…But relevance depends upon the angle of vision and the judicial angle may well be different from the administrative.

Lord Devlin ends the article with what I hope will become an aphorism well remembered in educational law:
For the British have no more wish to be governed by judges than they have to be judged by administrators.
I contend that the judges have made new law and have started governing in a sense to which they have no proper right.
I should like to make a case on this issue. Lord Salmon, one of the five Lords on the final appeal to the House of Lords, said:
The authority's letter of June 7 had pointed out…that pupils most suitable and likely to benefit from the type of education
—that is in grammar schools—
would be selected by a combination of reports, records and interviews instead of by an 11-plus examination.
So far so good. The noble Lord went on to mention
The evidence of a number of distinguished educationalists".
The number was two. One was a retired secondary school head teacher distinguished only for his talent in organising petitions against proposals for comprehensive reorganisation all over Britain. The other was a retired primary school head teacher without even that claim to distinction. The noble and learned Lord said that their evidence
showed that this alternative method of selection has been widely used since the 1960s in areas as far separated as Lancashire Division 24, close to Tameside, and the London Borough of Barnet and that it had proved entirely satisfactory.
Their evidence showed absolutely nothing of the kind. The selection procedure followed in Barnet was radically different from that operated in Lancashire Division 24 and neither of the two bore the remotest resemblance to the procedure described in the Tameside authority's letter about the procedure that it was going to carry out on 7th June. Neither on 11th June, which was the operative date of the Section 68 action, nor at any other time was the Tameside authority in a position to operate procedures of the kind described by the two allegedly distinguished educationalists. In the event, the procedure the authority operated was much more unsatisfactory than either and just about as unsatisfactory as I suspect the Minister had been led to expect.
Once more quotation from Lord Salmon's speech will put this in context. He finally said:
It seems incredible to me that these facts"—
these untrue facts—
were unknown to the Department of Education and not available to the Minister on 11th June.
If what Lord Salmon had been saying had been a recital of the true facts, it would indeed have been incredible, but the Department could scarcely have been expected to know and to make available to the Minister what were total figments of the noble Lord's imagination.
My other point relates to the judgment of the Chairman of the Appeal Court, Lord Wilberforce, who, at the beginning of his judgment, said:
These proposals"—
that is, all the proposals to make the various Tameside schools comprehensive—
on 11 th November 1975 received the Secretary of States's approval and the council then became entitled to put them into effect".
That also was stated ex cathedrain the House of Lords by Lord Wilberforce. It was not true. A substantial number of the schools had been given Section 13 approval by Mr. Edward Short when he was Secretary of State for Education as far back as 1969 and another section of those schools had been given Section 13 approval by no less a personage than the present Leader of the Opposition when she was Secretary of State in 1973.
For the Chairman of the Appeal Court, the final appeal court in our land, to get his facts wrong to that extent should cause grave disquiet in this Parliament about what our judicial procedures consist of. It certainly caused me grave disquiet and I think that anyone looking objectively and with regard to the facts at the sort of judgments handed down by the Appeal Court could only conclude that those judgments were misconceived, misguided and wrong in fact.
I fear that under our judicial system as we have it and run in the way we have it they have to stand now as the law of the land and we have to accept them, as they say in the marriage ceremony, for better or worse. I hope that we do not have to accept them until

death do us part, although I must not of course go so far in this debate as to call for legislation.
It is also worth going back to the original purpose of Section 68 of the 1944 Education Act. It was a compromise introduced on 12th July 1944 again by no less a personage—the stage is set on this occasion with substantial personages—than the Lord Chancellor, who was then Lord Simon. A noble and learned Lord, one Lord Roche, had suggested that there should be a still further step of taking the matter to the law courts and getting there, perhaps by a High Court judge, a judicial pronouncement between the parties. The Lord Chancellor said:
The view taken by the President of the Board of Education, and after consultation with him I must say that I share it, is that that is not a convenient procedure in the circumstances for we are dealing largely with matters of administration. I do not deny that His Majesty's Judges on occasion have intervened in this sort of case very practically and very usefully under previous Acts of Parliament, but still the Judges primarily have to decide matters of law.
What is involved here is not a matter of law but of applying good sense and preventing bias and local prejudice taking command of the situation. The position will not be that the Minister is deciding his own case.
This was an age of male chauvinism. He went on
He will merely be trying to get the machine to work, and I think we may have sufficient confidence in the man in charge of this all-important Department of Government."—[Official Report, House of Lords, 12th July, 1944, Vol. 132, c. S62.]
I have great confidence in the man in charge of education today, as I have in the person who previously held that post and to whom I am Parliamentary Private Secretary.
In this Parliament it is important to quote those words because by a quirk of our law—which, being a non-lawyer I do not understand—it was not proper to read out the intention of Acts in our divisional courts, appeal courts, or in the House of Lords. Therefore, none of our judges could be officially apprised of the original intention of the Act.
Last Session I introduced a modest Bill to restore the original intention of the House of Commons into the law. The then Mr. Butler proposed a tougher clause when the Bill first came before the House of Commons. The intention was not that there should be judicial interference.
I am worried about the decision on Tameside for a number of reasons, and my first question to the Minister is simple. Section 68 has been used about half a dozen times a year since the 1944 Act was passed. The Secretary of State has used the power to insist on minor matters of administration—the admission of individual children to particular schools, for instance. All local authorities in Britain, accept that overriding power of the Secretary of State. It has been a useful power and it would be dangerous if the Lords Wilberforce, Salmon, Diplock and Dilhorne took away that power without realising what they were doing.
Does the Secretary of State accept that she still has the power to use Section 68 year by year, as it has been used for the last 30 years? Does she consider that she still has the power to deal with the minutiae of the administration of education? Can she use that power and does she intend to go on using it? If she thinks that that power has been weakened, I assure her that some of us will be urging that she should get back that power by legislation.
Secondly, and much more important, does my right hon. Friend feel that she still has that power on wider issues? I quote a passage from the Committee proceedings on the Education Bill that went through Parliament this year. My hon. Friend the Member for The Wrekin (Mr. Fowler), whose departure from the Department of Education and Science I and many of my hon. Friends regret. said:
Once this Bill has become an Act, my right hon. Friend will not hesitate in such circumstances to use Section 68 of the 1944 Act should it prove necessary, in other words"—
here he describes "such circumstances"—
if an authority unreasonably refuses to carry out satisfactory approved proposals which give effect to the principle set out in Clause 1(1) of this Bill."—[Official Report, Standing Committee E, 13th April 1976; c. 1182.]
That was a forthright ministerial statement about the administrative use of Section 68 which was stated there and then to be part and parcel of the Education Act that has just passed through the House. Does my right hon. Friend still stand by her hon. Friend's statement. Her answer to that question is very important, because many of us will have something to say about that.
I have made certain criticisms of our judges, but the Tameside case should be taken very much more seriously by the House. Many calls have been made by judges and people in high office for a Bill of Rights setting out an appeal procedure over the procedures of the House. The principal advocate has been Sir Leslie Scarman, for whom I have tremendous respect as someone who has been in the forefront of the fight for civil liberties. I do not know whether that Bill of Rights would be supported by the House. In certain circumstances I would support it, and in certain circumstances I would not.
It is intolerable that our judges should already begin to behave towards Parliament and the Executive as though that Bill of Rights already existed and to pre-empt decisions and reinterpret the law differently. We take cognisance of that and, if it has been shown that, as a result of the Tameside case, the powers of the recent Education Act and of Parliament generally have been eroded, it is incumbent upon the Secretary of State to come to the Dispatch Box and tell Parliament what she will do about it, by legislation if necessary.

10.40 p.m.

The Secretary of State for Education and Science and Paymaster General (Mrs. Shirley Williams): >: I am grateful to my hon. Friend the Member for Lewisham, West (Mr. Price) for raising these matters tonight and for the frankness with which he has spoken. I have much sympathy with many of the points lie has made and I am sure that many of his comments will have made explicit some strong feelings that are held by many on this side of the House.
I look for a moment at the background. Section 68 provides that where the Secretary of State is satisfied that an authority or the managers or governors of a school have acted or are proposing to act unreasonably with respect to any duty or power, he or she may give such directions as to the exercise of that power or the performance of that duty as appear to him or her to be expedient. That is a very wide and sweeping power, almost without parallel in other legislation.
Successive Secretaries of State have invoked their powers very rarely. In almost every case where a direction has


been given it has been in relation to the attendance at school of individual pupils or small groups of pupils. There have been only three other cases in the whole history of the Education Act, of which Tameside is the most recent. That indicates how cautiously and carefully Ministers have always used Section 68.
The Department was advised as long ago as 1948 that "unreasonableness" in the context of Section 68 involved an element of perversity. Members of this Government and, indeed, all Labour Governments—I shall not commit the almost invisible Opposition—have always exercised their powers on that basis. The comments of their Lordships on this front were not such as to cause us any surprise.
For example, Lord Dilhorne said:
The question whether a local authority was acting or was proposing to act unreasonably had to be viewed objectively. It did not suffice that in his opinion"—
that is the Minister's opinion—
the conduct of the authority was unreasonable. For him to have power to give directions the conduct had to be such that no reasonable authority would engage in it.
Lord Diplock said:
To fall within this expression"—
that is "unreasonable"—
it must he conduct which no sensible authority acting with due appreciation of its responsibilities would have decided to adopt.
In both these cases the doctrine expounded is on all fours with that which Labour Ministers have always accepted. The judgments given by the Law Lords contain nothing that was surprising in the interpretation of the meaning of the word" unreasonable" or anything to suggest that the interpretation put on it by successive Labour Ministers was wrong. But it must be recognised—this is of crucial importance—that both the House of Lords and the Court of Appeal made judgments on issues and findings of fact—some of them have been mentioned by my hon. Friend—in relation to matters which, as the law was previously understood, were regarded as entirely within the province of the Minister or Secretary of State.
Moreover, there is no doubt that some of the judgments and some of the findings in the Tameside case are surprising, and I am not at all amazed that my hon. Friend should have said so. I find myself

in harmony with his comments and in particular in what he has had to say about Tameside's selection procedures.
I should like to return to the use of Section 68. My hon. Friend asked me a direct question in relation to the admission of individual pupils to schools. The power conferred by Section 68 has been used sparingly. But successive Secretaries of State have directed local education authorities to admit particular children to the schools preferred by their parents in circumstances where an authority's refusal of admission has been regarded as unreasonable. This will be an important point.
In the past five years 35 directions have been given in such circumstances, relating to about 90 children. One such direction, relating to the admission of two children to a primary school, has been issued within the past few days. They are issued without regard to the politics of the authority concerned. The power to give these directions is always used reluctantly, because the decision of an elected local authority charged with the administration of education in its area is not lightly to be set aside.
I think it right, as does my hon. Friend, that there should be an ultimate remedy available to ensure that the rights of parents are preserved. Taking into account the attitude of the higher courts, I assure my hon. Friend that I shall continue to use the Section 68 powers in appropriate cases and will examine what might be done to improve the arrangements whereby school places are allocated and how parents' views can be properly considered within a non-selective system.
Some hon. Members in the Opposition parties—I congratulate and welcome the hon. Member for Cambridge (Mr. James), who has come in for this important debate—have applauded the decision of the House of Lords in the Tameside case on the ground that it represents a check on the power of the Executive. It is regrettable that only one Opposition Member is present to hear my hon. Friend's powerful arguments.
Lawyers are brought up in the belief that the restraint of the Executive is one of the prime functions of the courts. But it is often a short-sighted belief. Any weakening of Section 68 will in practice


impinge much less on the powers of the Secretary of State than on the rights of parents, to which the Opposition so frequently draw attention.
If the Opposition really want to strengthen parental rights—and their reaction to the Tameside case gives one leave to doubt this—I am bound to say that they should join with us in seeking to limit the damage arising from the Tameside judgment.
The lack of interest of the Opposition in a matter which impinges on parental rights is in very marked contrast to that of my hon. Friend the Member for Stalybridge and Hyde (Mr. Pendry), who is here along with others of my hon. Friends, and who has repeatedly made representations to my hon. Friends and myself about the unfair procedures in his own constituency, which falls within the Tameside district.
It is right that a Government should have the broad support of parents, of most teachers and of local authorities before embarking upon the enforcement of a national policy.
We believe that this is the position in regard to comprehensive education. The movement towards comprehensive education has developed with Government encouragement, and more than three-quarters of our children receive their education in maintained comprehensive schools. Only one education authority has no comprehensive schools at all.
I have already made it clear that I accept the decision of the House of Lords, the highest court in the land—indeed, I must accept it unreservedly—in the Tameside case. But I deeply regret the reasons given for it. I endorse many of the comments of my hon. Friend the Member for Lewisham, West and I believe that the time has come

to recognise that the judgment may do lasting damage to a generation of children in Tameside.
Now that we have the Education Act on the statute book—this answers my hon. Friend's second question—we do not need to rely on interpretations of Section 68 alone. My belief is that no reasonable local authority—and I use the word "reasonable" advisedly—would wish to override the will of Parliament. I hope in consequence that damage caused by the House of Lords decision may be undone.

Mr. Mike Noble: Is my right hon. Friend aware that a large number of Tory-controlled local authorities seem at a distant look to be using the Tameside decision as a reason for holding back on going comprehensive? I cite the example of the Bury authority, part of which is in my constituency. One local authority had a plan for comprehensive education, but, following the Tameside decision, it has now decided to have a fresh look. Can my right hon. Friend tell us something about the powers being used by these authorities and their attitudes towards delaying tactics, and about the steps she will take in those circumstances?

Mrs. Williams: My hon. Friend will know that authorities may, of course, react like this, but Parliament both decided that authorities should be asked to go comprehensive and asked them to put forward their plans within six months. That decision was debated in the House and it was agreed by the House that six months was sufficient time for them to put forward their plans for comprehensive schemes. I am sure that they will obey the law.

Question put and agreed to.

Adjourned accordingly at twelve minutes to Eleven o'clock.